Home Affordability Calculator – How Much House Can You Afford?

Use our Home Affordability Calculator to determine a comfortable home purchase price based on your income, expenses, and financial goals. This tool applies both the standard 28/36 rule and a more conservative net income approach to help you make a sound financial decision.

Home Affordability Calculator

Calculate how much house you can afford based on your income and existing debt. This calculator uses both the 28/36 rule (housing costs ≤ 28% of gross income, total debt ≤ 36% of gross income) and a net income approach (housing costs ≤ 25-30% of take-home pay).

Income Information
Existing Debt
Housing Expenses
Gross Income Approach
Housing costs should not exceed 28% of gross income
Total debt (including housing) should not exceed 36% of gross income
Net Income Approach
Recommended for financial security
Upper limit for housing costs as percentage of take-home pay
How It Works

The calculator uses two approaches:

1. The 28/36 Rule:

  • 28% Rule: Monthly housing expenses should not exceed 28% of gross monthly income.
  • 36% Rule: Total monthly debt obligations should not exceed 36% of gross monthly income.

2. Net Income Approach:

  • Housing expenses should ideally not exceed 25-30% of your net (after-tax) income.

How to Use the Home Affordability Calculator

Follow these simple steps to determine how much house you can afford:

  • Enter Income Details: Input your gross (before tax) and net (after tax) monthly income.
  • Add Existing Debt: Include all your current monthly debt payments.
  • Specify Housing Expenses: Enter expected property tax rate, insurance costs, and HOA fees if applicable.
  • Set Mortgage Parameters: Input the interest rate, loan term, and down payment percentage.

The calculator will instantly provide four different home price estimates based on different financial rules.

Understanding the 28/36 Rule

The 28/36 rule is a common guideline used by lenders to determine how much you can afford to spend on housing:

  • The 28% Rule: Your monthly housing expenses (mortgage payment, property taxes, insurance, and HOA fees) should not exceed 28% of your gross monthly income.
  • The 36% Rule: Your total monthly debt obligations (housing expenses plus car loans, student loans, credit cards, etc.) should not exceed 36% of your gross monthly income.

This rule helps ensure you don't become "house poor" by spending too much of your income on housing.

The Net Income Approach

While the 28/36 rule is widely used, many financial experts recommend a more conservative approach based on your take-home pay:

  • Housing expenses should ideally not exceed 25-30% of your net (after-tax) income.
  • This approach provides a more realistic picture of your actual spending power since it's based on the money you actually have available to spend each month.
  • It's particularly useful for those with variable income or who live in high-tax areas.

Factors that Affect Home Affordability

Several factors influence how much house you can afford:

  • Income: Higher income allows for a more expensive home.
  • Existing Debt: More debt reduces your borrowing capacity.
  • Interest Rate: Lower rates increase your buying power.
  • Down Payment: A larger down payment reduces your loan amount and monthly payments.
  • Property Taxes: Higher property tax rates reduce affordability.
  • Insurance Costs: Higher insurance premiums reduce affordability.
  • HOA Fees: These additional monthly costs reduce the amount you can spend on the mortgage itself.

Tips for Increasing Your Home Buying Power

Here are practical tips to help you afford more home:

  • Pay Down Existing Debt: Reducing other debt payments frees up more income for housing.
  • Save for a Larger Down Payment: This reduces your loan amount and can eliminate private mortgage insurance (PMI).
  • Improve Your Credit Score: A better score can qualify you for lower interest rates.
  • Consider a Longer Loan Term: While this increases total interest paid, it reduces monthly payments.
  • Look in Areas with Lower Property Taxes: This can significantly impact your monthly housing costs.

Frequently Asked Questions About Home Affordability

Should I always spend the maximum amount I can afford?

No. It's often wise to buy less house than your maximum affordability to leave room in your budget for other goals, emergencies, and lifestyle expenses.

How does my credit score affect home affordability?

Your credit score impacts the interest rate you'll qualify for. A higher score typically means a lower rate, which increases your buying power.

What's not included in these calculations?

These calculations don't account for utilities, maintenance costs, or future changes in income. Consider these additional expenses when making your final decision.

Additional Resources

Explore these related tools and articles to help with your financial calculations:

Finding the right balance between homeownership and financial comfort is crucial. This calculator provides guidelines, but your personal comfort level with debt and your specific financial goals should ultimately guide your decision.