Home Affordability Calculator

Enter what your household earns before tax, what you already pay each month towards other debts, and what you have saved for a deposit. The calculator works backwards from the two ratios a mortgage underwriter applies and returns the highest price they support, the mortgage you would need to reach it, and what the house would actually cost you every month. The defaults describe a household earning 120,000 with 900 of monthly debt payments and 60,000 saved, borrowing at 6.5% over thirty years; they land on about 385,000.

Two ratios, and the smaller one wins

Affordability is not one test but two. The housing ratio, often called the front-end ratio, compares the whole monthly housing cost against gross monthly income. The total debt ratio, or back-end ratio, adds every other monthly obligation to that housing cost before dividing. Someone with no other debts is held back by the first; someone carrying a car loan and a student loan is usually held back by the second.

budget = min(income ÷ 12 × front, income ÷ 12 × back − debts)

Both use gross income, before tax and before anything comes out for retirement or health cover, which is one reason the result can feel optimistic next to what reaches your account. Debts means the minimum payments an underwriter counts, not living costs.

Working the default example through

Gross income of 120,000 is 10,000 a month. The cautious standard allows 28% of that for housing, or 2,800, and 36% for total debt, which is 3,600 less the 900 already committed, or 2,700. The smaller figure wins, so the housing budget is 2,700 and the total debt ratio is what sets the ceiling.

Any service charge comes off first, and so does a premium entered as an amount, because both are flat rather than rates; the defaults carry neither, so the whole 2,700 is available. Everything else moves with the price, which makes the final step less obvious than it looks. Each dollar borrowed costs k a month, the ordinary amortization factor, and each dollar of price carries t ÷ 12 in property tax and s ÷ 12 in home insurance, so the price and the payment have to be solved together:

P = (available + D × k) ÷ (k + (t + s) ÷ 12)

At 6.5% over thirty years k is 0.00632068, and 1.1% in tax with 0.5% in insurance gives 0.00133333. Because the price this produces leaves 60,000 short of a fifth down, mortgage insurance joins k and the answer settles at 384,632. The mortgage would be 324,632, and the 2,700 breaks down as 2,051.89 of principal and interest, 352.58 of property tax, 160.26 of home insurance and 135.26 of mortgage insurance. Each part is rounded on its own, so the rows can land a cent or two either side of the total.

What the monthly figure has to cover

The headline price is only trustworthy because the monthly figure behind it carries the whole housing cost, bar flood cover where a lender requires it. Principal and interest is a smaller part of the story than most buyers expect: here it is 2,052 out of 2,700, so nearly a quarter of the payment never touches the loan. A calculator that stops at principal and interest, charging no mortgage insurance either, offers 487,169 here, about 27% more house than the payment can carry.

The property tax field wants the effective rate, tax as a share of what the house is worth, which is how state comparisons are published. Those vary enormously: NAHB's analysis of 2024 Census survey data puts them between 0.31% in Hawaii and 1.79% in Illinois, against 0.89% nationally. The 1.1% default sits deliberately above that, since a purchase usually resets the assessment to what you paid. Take care copying a figure off a county bill, because millage is quoted against assessed value: 10% of market value in Alabama, 4% in South Carolina and 40% in Georgia. Home insurance is a rate on value too, defaulting to 0.5%. Cover is priced on rebuilding cost, and land is not rebuilt, so a rate on price runs below one on cover; the national average premium is about 2,500 a year on 400,000 of cover. Switch the control to enter a quoted premium. Association dues are pure subtraction: at these settings every 100 a month of them removes about 12,400 from what you can borrow.

Mortgage insurance is the last piece, and its rate is yours too. It applies only while the deposit is under a fifth of the price, and it is charged yearly against the loan. Insurers price it in bands by credit score and loan-to-value, roughly 0.3% to 1.5%, so the 0.5% default suits a strong credit file with a moderate deposit and anyone putting down 5% should raise it. Nor does it last: under the Homeowners Protection Act of 1998 a lender must end it once the balance reaches 78% of the original value, and cancel on request at 80%. Set the field to zero and it leaves the arithmetic entirely.

A rate above zero creates a boundary. As savings grow there is a stretch where the ceiling sits at exactly five times the deposit, because one dollar more would trigger the insurance and the payment would stop fitting. In that stretch the monthly cost comes in under the allowance, and the result names the insurance as the reason.

Where the ratios come from

Before the 1930s an American lender looked at the property rather than the payslip, rarely advancing more than half its value, and wrote the loan for only a few years with the balance due at the end. The National Housing Act of 1934 created the Federal Housing Administration, whose insurance programme arrived with written underwriting standards, and ratio tests spread from there as Fannie Mae, chartered in 1938, and Freddie Mac, from 1970, standardised what they would buy.

Automated underwriting then loosened them. Fannie Mae's Desktop Underwriter arrived in 1995 and judged a whole file rather than a single ratio, which is why the published limits today are higher and carry no housing ratio.

Those limits come from Fannie Mae's selling guide: 36% is its ceiling for a manually underwritten loan, 45% is as far as that stretches for a borrower with the credit score and reserves to justify it, and 50% is the most an automated approval allows.

Why your lender's number will be different

Several reasons, all of them ordinary. Underwriters use documented income, which for anyone self-employed or paid on commission usually means a two-year average rather than what you earn today. They take tax and insurance from the actual property rather than an estimate, add rules of their own to the agency limits, and price the rate off your credit file, so the rate to enter here is one you have been quoted, not the advertised figure.

Two assumptions sit underneath the answer. All of your savings go to the deposit, when closing costs of 2 to 5% of the price come out of the same pot and pull the ceiling down a few per cent. And nothing enforces a minimum deposit, though conventional loans start at 3% down and FHA at 3.5%, so a zero-deposit answer is theoretical unless you qualify for a VA loan, which charges a one-off funding fee and nothing monthly, or a USDA loan, whose 0.35% annual fee behaves like mortgage insurance that never cancels.

The larger caveat is that this page answers what a lender would permit, not what you should spend. The ratio ignores childcare, commuting, retirement saving and maintenance, and maintenance alone runs at 1 to 4% of the value of the house every year. Treat the number as the ceiling of the room rather than the height to build to.

Outside the United States

The debt-to-income test is an American convention. British lenders start from a loan-to-income cap, with the Bank of England's Financial Policy Committee limiting the share of new lending at or above 4.5 times income, then run an affordability assessment against a stressed rate. Australian lenders assess against the rate on offer plus a serviceability buffer set by APRA, raised to 3 percentage points in October 2021. Canadian borrowers meet a stress test at the greater of the contract rate plus two points or a floor rate, using gross and total debt service ratios with their own thresholds.

The arithmetic still works anywhere, with three adjustments. Read the property tax field as council tax, rates or land tax as a percentage of value, cut the American home insurance default, and set the mortgage insurance rate to zero. Canada requires cover below a fifth down, and Australian lenders usually ask for it, though a government scheme has waived it for first home buyers under each city's price cap since October 2025. The premium is a one-off charge of a few per cent of the loan, usually added to it, so it belongs with the price rather than the payment.

These figures are estimates for planning rather than a lending decision; an actual approval depends on documented income, credit history, the property itself and the lender's own rules. See the site disclaimer.