Calculated using standard mathematical and industry formulas.
Home purchasing power follows the 28/36 rule: total monthly housing costs should not exceed 28% of gross monthly income, and total debt payments (mortgage + car/student loans) must stay under 36%. A household earning $100,000 annually can typically afford a home priced between $350,000 and $400,000.
How to use this calculator?
Enter your total combined pre-tax annual household income.
Enter your recurring monthly debt obligations (car loans, student loans, credit card minimums).
Enter the cash savings you have reserved for a down payment.
Adjust expected mortgage interest rates, property tax rates, and home insurance.
Read your maximum affordable home purchase price, max loan amount, and recommended monthly PITI budget.
Formula & calculation method
28/36 Underwriting Affordability Equations
Max Allowed Housing Payment = min(Gross Monthly Income × 0.28, (Gross Monthly Income × 0.36) - Monthly Debt Obligations); Max Home Price = Calculated Mortgage Capacity + Down Payment Cash
k = monthly mortgage principal & interest factor = r(1+r)^n / [(1+r)^n - 1].
Step-by-step calculation example
$100,000 income, $500 monthly debt, $60,000 down payment @ 6.5% interest → Max Home Price: ~$376,000 (Max PITI: $2,333/mo).
Key insights to remember
Lenders use the 28/36 rule: total housing costs (PITI) shouldn't exceed 28% of gross income, and total debt (housing + existing debt) shouldn't exceed 36%.
Existing monthly debt reduces home buying power significantly; every $100 in existing monthly debt reduces home affordability by ~$15,000.
Making a 20% down payment eliminates private mortgage insurance (PMI), keeping monthly payments lower.
In addition to down payment cash, homebuyers should reserve 2% to 5% of the purchase price for closing costs and emergency reserves.
How to interpret your results?
The Standard 28/36 Debt-to-Income Rule
The front-end ratio (28%) caps housing costs alone. The back-end ratio (36%) ensures total debt obligations (housing + auto loans + student debt + credit cards) remain manageable.
Expert advice & guidance
💡 Home buying tip: Paying off a smaller car loan or revolving credit card balance before applying for a mortgage immediately lowers your DTI ratio, boosting your purchasing power by tens of thousands of dollars.
Frequently asked questions
How to save for a house down payment efficiently?
Save efficiently by opening a high-yield savings account (HYSA), setting up automatic monthly transfers, reducing discretionary spending, and applying windfalls.
How to buy a house with no money down?
Buy with 0% down payment using USDA loans (rural properties) or VA loans (military veterans), or leverage state first-time homebuyer down payment assistance programs.
What credit score is needed to buy a house?
Conventional loans generally require a minimum credit score of 620, FHA loans require 580 (for 3.5% down), and VA/USDA loans target 620+.
How much money do you need upfront to buy a house?
Plan for 3% to 20% down payment plus 2% to 5% of home price in closing costs (appraisal, title insurance, inspection, escrow prepayments).
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