How Much House Can I Afford?

A common guideline is that your total monthly housing costs should not exceed 28% of your gross monthly income (front-end DTI ratio). Additionally, your total debts including housing should stay below 43% of gross income (back-end DTI). For example, with a $100,000 salary and $500/month in debts, your maximum housing payment would be about $3,083/month (43% of $7,167 minus $500), which could support a home price of roughly $350,000-$400,000.

The 28/36 rule is a lending guideline: spend no more than 28% of gross monthly income on housing costs (mortgage, taxes, insurance), and no more than 36% on total debt including housing. Some lenders and loan programs (like FHA) use higher limits, up to 43% or even 50% back-end DTI in some cases. This calculator uses the 43% back-end DTI limit as the primary constraint, which is the maximum for most qualified mortgages.

Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home price. PMI protects the lender (not you) if you default on the loan. It typically costs about 0.5% of the loan amount per year, added to your monthly payment. Once you build 20% equity in your home, you can request PMI removal. Some loan programs like VA loans don't require PMI.

While 20% is ideal to avoid PMI, many buyers put down less. FHA loans require as little as 3.5%, and conventional loans can go as low as 3%. A larger down payment means a smaller loan, lower monthly payments, and no PMI — but it also means more cash tied up in your home. Consider keeping an emergency fund of 3-6 months' expenses separate from your down payment.

This calculator includes the main costs: principal & interest, property tax, homeowner's insurance, and PMI (if applicable). It does not include HOA fees, maintenance costs (typically 1-2% of home value per year), utilities, or closing costs. Budget for these separately. A good rule of thumb is to keep your total housing budget (including these extras) well within the DTI limits shown.