Mortgage
How Much House Can I Afford? A Practical Guide
Home affordability comes down to one question: what monthly housing payment fits your income and existing debts — and what home price does that payment support? This guide walks through each piece.
8 min read
The inputs that matter
| Input | Why it matters |
|---|---|
| Gross monthly income | Lenders compare housing and debt payments against income before taxes. |
| Monthly debt payments | Car, student loan, card minimums and other debts reduce room for a mortgage. |
| Down payment | Reduces the loan amount; under 20% down often adds mortgage insurance. |
| Interest rate | Changes how much loan a given payment can support. |
| Loan term | A 30-year term lowers the payment but increases total interest versus 15 years. |
| Property taxes | Paid monthly through escrow on many loans; varies widely by location. |
| Home insurance | Usually required by the lender; also part of the monthly cost. |
| HOA dues | Required for many condos and planned communities. |
| Closing costs | Paid upfront at purchase; they compete with your down payment for cash. |
Debt-to-income ratios
Lenders commonly look at two ratios. The front-end ratio compares housing costs (principal, interest, taxes, insurance and HOA) to gross monthly income. The back-end ratio adds all other monthly debt payments. A widely cited guideline is 28% front-end and 36% back-end, but actual limits depend on the loan program and lender, and many approve higher ratios.
Front-end ratio = Housing payment ÷ Gross monthly income Back-end ratio = (Housing payment + Other debts) ÷ Gross monthly income
From payment to home price
Once you know the most you want to spend on housing each month, subtract taxes, insurance and HOA dues. What's left is available for principal and interest. The loan that payment supports is:
Loan = Payment × [1 − (1 + i)^−N] ÷ i
- i
- Monthly interest rate (annual rate ÷ 12)
- N
- Number of monthly payments (360 for 30 years)
Add your down payment to the loan amount and you have an estimated home price.
Worked example
Example: $90,000 income, $400 in monthly debts
- Gross monthly income = $7,500
- 28% front-end limit = $2,100; 36% back-end limit = $2,700 − $400 debts = $2,300
- The lower limit, $2,100, sets the housing budget
- Subtract $300 property tax and $120 insurance → $1,680 for principal and interest
- At 6.5% for 30 years, $1,680 supports a loan of about $265,800
- Add a $40,000 down payment
Estimated price ≈ $305,800 under these assumptions. This is an illustration, not a lender approval.
How interest rates change affordability
Using the same $1,680 principal-and-interest budget, a 7.5% rate supports a loan of about $240,300 instead of $265,800. A one-point rate change moved buying power by roughly $25,000 with no change in income.
How the down payment changes the monthly payment
| Home price $350,000 | Loan amount | Principal & interest (6.5%, 30 yr) |
|---|---|---|
| 10% down ($35,000) | $315,000 | ≈ $1,991 |
| 20% down ($70,000) | $280,000 | ≈ $1,770 |
A smaller down payment also leaves more cash for closing costs and an emergency fund, so a larger down payment is not automatically better. You can test both with the Mortgage Calculator.
Lender approval vs personal affordability
A lender looks at whether you are likely to repay. Your own budget also has to cover retirement saving, childcare, commuting, maintenance (often estimated at 1–2% of the home's value per year) and an emergency cushion. The payment that feels comfortable may be well below the maximum you qualify for.
Renting may make more sense if you expect to move soon or need flexibility. The Rent vs Buy Calculator compares the long-term costs.
How to use the Mortgage Affordability Calculator
- Enter your annual gross income and total monthly debt payments.
- Add your down payment, interest rate and loan term.
- Enter estimated property tax, insurance and HOA dues.
- Press Calculate to see the estimated home price, loan amount and which ratio limits the result.
If the assumptions leave no room for a mortgage payment, the calculator says so rather than showing a misleading number. Once you have a price in mind, the Amortization Calculator shows how each payment splits between principal and interest, and the Refinance Calculator helps later if rates change.
Run your own numbers
See how much house you may be able to afford based on income and debts.
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