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Mortgage / THE DECISION DESK

Home Affordability Calculator

Find the most expensive home your income supports, and see which lender ratio is actually limiting you — income or the debt you already carry.

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Start from
Your finances

Gross, before tax — which is what lenders underwrite against.

Car loans, student loans, card minimums. Not utilities or groceries.

The loan and the house
Lender ratios

Housing payment alone. 28% is the conservative standard.

Housing plus every other monthly obligation. 36% conservative, 43% is the common upper bound.

Estimated price ceiling

$389,121

With $60,000 down, giving a $329,121 loan and a $2,567 monthly payment.

The monthly payment

Principal and interest$2,080
Property tax$357
Insurance$130
Total housing$2,567

What is limiting you

Housing ratio allows$2,567
Total debt ratio allows$2,650
Binding constraintHousing ratio

How the ceiling moves with the rate

With your debtsWith no other debt
$0$200k$400k4%6%8%10%Mortgage rate

Rate moves the ceiling more than almost anything else you control. The gap between the lines is what your other monthly debt costs you in buying power — and where the lines meet, the housing ratio is binding and clearing debt would not help.

View as table
Mortgage rateWith your debtsWith no other debt
3.00%$515,845$515,845
3.25%$504,777$504,777
3.50%$494,054$494,054
3.75%$483,670$483,670
4.00%$473,613$473,613
4.25%$463,875$463,875
4.50%$454,447$454,447
4.75%$445,321$445,321
5.00%$436,486$436,486
5.25%$427,935$427,935
5.50%$419,657$419,657
5.75%$411,646$411,646
6.00%$403,891$403,891
6.25%$396,386$396,386
6.50%$389,121$389,121
6.75%$382,088$382,088
7.00%$375,280$375,280
7.25%$368,689$368,689
7.50%$362,308$362,308
7.75%$356,129$356,129
8.00%$350,145$350,145
8.25%$344,350$344,350
8.50%$338,737$338,737
8.75%$333,299$333,299
9.00%$328,030$328,030
9.25%$322,924$322,924
9.50%$317,975$317,975
9.75%$313,178$313,178
10.00%$308,528$308,528
Clearing your other debt would not raise this number. The housing ratio is binding, not the total debt ratio, so your ceiling is set by income against the housing payment alone. More income or a larger down payment would move it; paying off the $650 a month would not.
What a lender will add that this does not. PMI on a down payment under 20%, which can be a few hundred dollars a month. Your credit score, which changes the rate you are offered. Loan-type limits — FHA, VA and jumbo all underwrite differently. This is a planning figure, not a pre-approval.

How this is calculated

Two limits are computed and the lower one is used, which is exactly how a lender underwrites:

housing budget    = income/12 × housing ratio
total debt budget = income/12 × total ratio − other debts
budget               = min(the two)

Reporting which of the two binds is the useful part. If the total debt ratio binds, clearing other obligations raises your ceiling. If the housing ratio binds, it will not — and knowing which case you are in changes what you should do next.

The maximum price is found by bisection rather than algebra. Property tax and insurance are charged as percentages of the home value, so the payment depends on the answer you are solving for. Sixty iterations narrow the price to well under a dollar:

payment(price) = pmt(price − down) + price × (tax + ins)/12 + hoa
find the largest price where payment(price) ≤ budget

Not modelled: PMI below 20% down, credit-score-dependent pricing, loan-programme limits, or lender overlays. All of these tighten the real number rather than loosening it.

Common questions

›What are the 28/36 ratios?

Two limits lenders apply, taking whichever is lower. The housing ratio caps the full housing payment — principal, interest, taxes, insurance and HOA — at 28% of gross monthly income. The total debt ratio caps housing plus every other monthly obligation at 36%. Many lenders will stretch to 31/43, and some government-backed programmes go further, but 28/36 is the conservative benchmark and a reasonable place to start.

›Why does the tool say clearing my debt would not help?

Because the housing ratio is binding rather than the total debt ratio. Below a certain level of other debt, the 28% housing cap is the tighter of the two, so your ceiling is set by income against the housing payment alone and removing a car payment changes nothing. This is genuinely counter-intuitive and worth knowing before you rush to pay off a loan expecting it to buy you a bigger house.

›Should I actually borrow the maximum?

Almost certainly not. This is what a lender will allow, which is a different question from what leaves you comfortable. The ratios use gross income, so they ignore taxes, retirement contributions, childcare, and everything else that comes out before you see the money. They also assume nothing goes wrong. Many people who borrow at the maximum find the payment workable but the rest of their finances squeezed for years.

›Why does the mortgage rate move the number so much?

Because the payment is fixed by your income, so a higher rate buys less principal with the same monthly cost. Moving from 5% to 7% typically cuts buying power by roughly 20% at the same payment. It is the single largest input you do not control, which is why the chart plots the ceiling across a range of rates rather than only at the one you entered.

›What is missing from this estimate?

PMI, which applies below a 20% down payment and can add a few hundred dollars a month. Your credit score, which determines the rate you are actually offered. The specific rules of FHA, VA and jumbo loans, which underwrite differently. And any lender overlay stricter than the standard ratios. Treat this as a planning figure to be confirmed by a pre-approval, not as a substitute for one.

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