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Mortgage Affordability Calculator

Banks and mortgage lenders use two debt-to-income ratios to decide how much they will lend you: the front-end ratio (your housing costs should not exceed 28% of gross income) and the back-end ratio (all your debts combined should not exceed 43%). This calculator applies both rules to your numbers and tells you the maximum home price you qualify for - before you talk to a lender. It also estimates your full monthly PITI (principal, interest, taxes, and insurance) so you know the real monthly cost, not just the mortgage payment.

Car loans, student loans, credit cards

US average: 0.8-1.5%

Enter your annual income and down payment to calculate your maximum home price.
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This calculator uses standard DTI rules as a general guideline. Actual mortgage approval depends on your credit score, employment history, loan type, lender policies, and current market conditions. The result is an estimate, not a pre-approval. Consult a licensed mortgage broker for advice specific to your situation.

How to use this tool

  1. 1Enter your annual gross income - use pre-tax income before any deductions.
  2. 2Enter your total monthly non-housing debts: car loan payments, student loan minimums, minimum credit card payments. Do not include utilities, food, or subscriptions.
  3. 3Enter your available down payment in dollars.
  4. 4Set the mortgage interest rate and loan term. Use a rate you have been quoted or the current market rate.
  5. 5Adjust the annual property tax rate, homeowner insurance rate, and monthly HOA if applicable.
  6. 6Read the maximum home price, maximum loan amount, estimated monthly PITI, and both DTI ratios. The ratio that is binding is shown automatically.

Formula used

Monthly income = annual gross income / 12. Maximum housing payment (front-end) = monthly income x 28% minus HOA. Maximum housing payment (back-end) = monthly income x 43% minus monthly debts minus HOA. Maximum housing payment = lower of the two limits. Maximum loan = maximum housing payment / monthly mortgage factor (derived from the amortisation formula). Maximum home price = maximum loan + down payment. Monthly PITI = mortgage payment + (home price x property tax %) / 12 + (home price x insurance %) / 12 + HOA.

Example

80,000 income, 60,000 down, 7% rate, 500/month in car and student loans

Monthly income: 6,667. Front-end limit: 28% = 1,867 - HOA 0 = 1,867. Back-end limit: 43% = 2,867 - 500 debts = 2,367. Binding: front-end. Max housing payment: 1,867. At 7% 30-year, max loan approx 280,000. Max home price: 280,000 + 60,000 = 340,000. PITI estimate: 1,867 + (340,000 x 1.7% / 12) = 2,349/month.

Same income with no existing debts

Without the 500/month in debts, the back-end limit rises to 2,867. Front-end still binds at 1,867. Max home price stays 340,000 in this scenario. The front-end ratio is the binding constraint regardless of debts unless debts are very high relative to income.

Common use cases

  • First-time buyers wanting to know their price range before starting their property search
  • Buyers whose lender pre-qualification seems low, trying to understand which DTI constraint is binding
  • Couples combining incomes and wanting to see their joint maximum home price
  • Buyers considering paying off a car loan before applying for a mortgage to increase their limit
  • Financial planners helping clients set realistic homeownership goals based on their income trajectory

Common mistakes

  • Using net income instead of gross income - lenders calculate DTI from gross (pre-tax) income; using your take-home pay will underestimate your maximum.
  • Forgetting to include all recurring debt payments - the back-end ratio includes all minimum payments on loans and credit cards, even if you pay more than the minimum.
  • Treating the maximum as the target - just because you can borrow the maximum does not mean you should; leaving buffer below your DTI limits reduces financial stress.
  • Not accounting for PMI - if your down payment is below 20%, private mortgage insurance adds 0.5-1% of the loan amount annually to your monthly costs, reducing your effective affordability.

Frequently asked questions

What is the 28/43 DTI rule?

Lenders use two debt-to-income ratios. The front-end ratio caps housing costs (mortgage principal and interest, property taxes, insurance, HOA) at 28% of gross monthly income. The back-end ratio caps all monthly debt payments including housing at 43% of gross income. Both limits apply; the one that is more restrictive for your situation determines your maximum loan.

What counts as monthly debt for the back-end ratio?

Include minimum required monthly payments on: car loans, student loans, credit cards, personal loans, child support, and alimony. Do not include utilities, phone bills, subscriptions, groceries, or other living expenses - lenders do not factor these into DTI.

Can I get a mortgage with a higher DTI than 43%?

Some loan programmes allow higher DTIs. FHA loans can go up to 57% back-end DTI in some cases. VA loans have flexible DTI limits. Conventional loans backed by Fannie Mae and Freddie Mac may allow up to 50% with compensating factors (large down payment, excellent credit, significant reserves). However, higher DTI typically means higher rates and stricter underwriting.

Does the calculator account for PMI?

Not directly. If your down payment is below 20%, private mortgage insurance (PMI) will add to your monthly payment - typically 0.5-1% of the loan amount annually. This reduces your effective affordability. You can estimate the impact by adding an equivalent amount to your monthly debts.

Is this the same as a mortgage pre-approval?

No. A pre-approval requires a full credit check, income verification, employment history, and a lender review of your complete financial picture. This calculator gives a reasonable estimate based on standard DTI rules but cannot account for credit score, loan type, lender-specific policies, or property appraisal requirements.

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