# What is my mortgage affordability?

Computes the highest home price whose monthly payment, with property tax, insurance, HOA dues, and PMI, fits the lender’s housing and total debt-to-income limits.

- Page: https://www.acalculator.org/finance/home-affordability-calculator
- JSON spec: https://www.acalculator.org/finance/home-affordability-calculator.json
- Version: b30c7c2c54ae

## Default answer

Example with the default inputs (Gross income $100,000.00, Other debt payments a month $500.00, Down payment $60,000.00, Interest rate 6.5%, Loan term (years) 30, Property tax (per year) 1.1%, Home insurance $1,500.00, HOA dues $0.00, PMI rate (per year) 0.5%, Housing limit (front-end ratio) 30%, Total debt limit (back-end ratio) 36%): With $100,000.00 of yearly income and $500.00 of other monthly debts, you can afford a home of about $363,108.95, a $2,500.00 monthly payment.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| income | Gross income | Your household income before tax and deductions. |
| debts | Other debt payments a month | Monthly payments on other debts: car loans, student loans, minimum credit card payments, child support. |
| down | Down payment | The cash you will put toward the price. |
| rate | Interest rate | The fixed yearly mortgage rate. The monthly rate is this ÷ 12. |
| years | Loan term (years) | The length of the mortgage, for example 30 or 15 years. |
| tax | Property tax (per year) | The yearly property tax as a percent of the home price. |
| insurance | Home insurance | The homeowners insurance premium. |
| hoa | HOA dues | Homeowners association or condo dues. |
| pmi | PMI rate (per year) | Private mortgage insurance per year, as a percent of the loan, charged under 20% down. |
| front | Housing limit (front-end ratio) | The most the housing payment may be, as a percent of gross monthly income. |
| back | Total debt limit (back-end ratio) | The most all debt payments, housing included, may be, as a percent of gross monthly income. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| price | Home price you can afford | The highest price whose monthly payment fits both debt-to-income limits. |
| loan | Loan amount | The price minus the down payment. |
| payment | Monthly housing payment | Principal and interest, property tax, insurance, HOA dues, and PMI at that price. |
| pi | Principal and interest | The level monthly payment on the loan. |
| taxes | Property tax | The property tax for one month. |
| insurance | Home insurance | The home insurance for one month. |
| hoa | HOA dues | The HOA dues for one month. |
| pmiAmount | PMI | Private mortgage insurance for one month, when the down payment is under 20%. |
| downPct | Down payment | The down payment as a percent of the price. |
| frontRatio | Housing ratio (front-end) | The housing payment as a percent of gross monthly income. |
| backRatio | Total debt ratio (back-end) | The housing payment plus other debts, as a percent of gross monthly income. |
| limit | Limit | Which debt-to-income limit sets the budget. |
| note | Note | A note when the down payment is under 3% of the price, below what most conventional loans allow. |

## Method

budget = min(front × income ÷ 12, back × income ÷ 12 − debts); price = (budget − insurance − HOA + D × a) ÷ (a + tax ÷ 12), with a = r ÷ (1 − (1 + r)^−n), adding PMI when the loan is over 80% of the price.

## Assumptions

- Lenders compare the housing payment and all debt payments with gross monthly income; the limits are yours to set.
- The rate is fixed; property tax is a percent of the price; insurance and HOA dues are fixed amounts.
- PMI is charged as a yearly percent of the loan when the loan is over 80% of the price.
- Closing costs and cash reserves are not included. Defaults are examples, not current rates.

## Worked examples

1. income = $100,000.00, debts = $500.00, down = $60,000.00, rate = 6.5%, years = 30, tax = 1.1%, insurance = $1,500.00, hoa = $0.00, pmi = 0.5%, front = 30%, back = 36% gives price = $363,108.95, loan = $303,108.95, payment = $2,500.00, pmiAmount = $126.30, frontRatio = 30%, backRatio = 36%. Source: Freddie Mac: a housing ratio under 30%; Fannie Mae Selling Guide B3-6-02: a 36% total ratio.
2. income = $150,000.00, debts = $1,000.00, down = $100,000.00, rate = 6%, years = 30, tax = 1%, insurance = $1,800.00, hoa = $100.00, pmi = 1.5%, front = 30%, back = 36% gives price = $500,000.00, loan = $400,000.00, pmiAmount = $0.00, payment = $3,064.87.
3. income = $60,000.00, debts = $0.00, down = $0.00, rate = 0%, years = 30, tax = 0%, insurance = $1,200.00, hoa = $0.00, pmi = 0%, front = 30%, back = 36% gives price = $504,000.00, loan = $504,000.00, payment = $1,500.00, note = Most conventional loans need at least 3% down (at most 97% loan-to-value)..

## FAQ

### How much house can I afford?

Lenders look at two ratios of your gross monthly income: the housing payment (front-end) and all your debt payments (back-end). With $100,000 a year, $500 of other debts, and limits of 30% and 36%, the most you can spend on housing is $2,500 a month. With $60,000 down at 6.5% over 30 years, that buys a home of about $363,109.

### What debt-to-income ratio do lenders allow?

It depends on the loan. Fannie Mae allows a total ratio of 36% for manually underwritten loans, up to 45% with strong credit and reserves, and 50% through its automated system. FHA uses 31% for housing and 43% in total without compensating factors. VA uses 41% in total, with a residual income test. Freddie Mac suggests a housing ratio under 30%.

### What counts as debt in the back-end ratio?

Monthly payments on car loans, student loans, personal loans, minimum credit card payments, child support, and alimony, plus the new housing payment. Everyday costs such as food and utilities do not count, but you still need room for them in your budget.

### Why does PMI lower what I can afford?

With less than 20% down, a conventional loan usually adds private mortgage insurance, which takes part of the monthly budget. Sometimes the highest price is exactly five times your down payment: a little more would add PMI and push the payment over the limit.

### Does this include closing costs?

No. The down payment here is what goes toward the price. Keep separate cash for closing costs (often 2% to 5% of the price, says Freddie Mac) and an emergency fund.

### Is the most I can afford what I should spend?

Not always. The limits show what lenders may approve, not what fits your life. A lower price leaves room for savings, repairs, and changes in income. Try a lower housing limit to see a safer price.

## Sources

- Fannie Mae Selling Guide B3-6-02, Debt-to-Income Ratios (36% manual, up to 45% with credit score and reserves, 50% for Desktop Underwriter). https://selling-guide.fanniemae.com/sel/b3-6-02/debt-income-ratios
- U.S. Department of Housing and Urban Development, Mortgagee Letter 2014-02 (FHA manual underwriting: 31% housing and 43% total without compensating factors). https://www.hud.gov/sites/documents/14-02ml.pdf
- 38 CFR 36.4340, Underwriting standards (VA: debt-to-income ratio of 41% and residual income). https://www.ecfr.gov/current/title-38/chapter-I/part-36/subpart-B/section-36.4340
- Freddie Mac, How much home can I afford? (housing expense ratio ideally less than 30%). https://myhome.freddiemac.com/blog/homebuying/how-much-can-you-afford
- Freddie Mac, What are closing costs and how much will I pay? (2% to 5% of the purchase price). https://myhome.freddiemac.com/blog/homebuying/what-are-closing-costs-and-how-much-will-i-pay
- Consumer Financial Protection Bureau, What is a debt-to-income ratio? https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/