How to Use the Mortgage Affordability
This Mortgage Affordability calculator helps you understand how much house you can afford by analysing your income, debts, and down payment against standard lender criteria. It calculates your Debt-to-Income (DTI) ratio, estimates maximum borrowing, and breaks down monthly payments including principal, interest, taxes, and insurance.
Enter your gross annual income, monthly debt obligations, available down payment, and the home price you're considering. The tool immediately shows whether you meet the typical 28% front-end DTI limit (housing costs only) and 36–43% back-end DTI limit (all debts), plus your estimated monthly payment.
Lenders use the DTI ratio as a primary qualification metric. Most conventional loans require a back-end DTI below 43%, while FHA loans allow up to 50% in some circumstances. A lower DTI not only makes approval easier but also qualifies you for better interest rates.
📊 Worked Example
$90,000 household income, $400/month existing debts, buying a $350,000 home with 10% down:
- Loan amount: $315,000
- Monthly P&I at 6.8%: $2,055
- Estimated taxes + insurance: $450/month
- Front-end DTI: 33% (under 36% threshold ✓)
- Back-end DTI: 39% (within 43% limit ✓)
Common Use Cases
- ✅ Finding out the maximum home price you can realistically afford
- ✅ Understanding whether you qualify for a conventional or FHA mortgage
- ✅ Comparing different down payment sizes and their effect on monthly costs
- ✅ Stress-testing affordability if interest rates rise
- ✅ Planning how much debt to pay down before applying for a mortgage
- ✅ Estimating total monthly housing costs including taxes and insurance
- ✅ Comparing 15-year vs 30-year mortgage scenarios
Frequently Asked Questions
What is the 28/36 rule in mortgage lending?
The 28/36 rule says your housing costs (mortgage, taxes, insurance) should not exceed 28% of gross monthly income, and your total debts (housing + car loans + credit cards etc.) should not exceed 36%. Lenders use these benchmarks to assess affordability.
How much deposit do I need for a mortgage?
In the US, a conventional loan typically requires 5–20% down. Putting down less than 20% usually requires Private Mortgage Insurance (PMI), adding $50–$200/month to your payment. FHA loans allow as little as 3.5% down for qualifying borrowers.
What income do lenders count?
Lenders count verifiable, stable income — salary, wages, self-employment income (averaged over 2 years), pension, rental income, and investment income. Overtime, bonuses, and commission may count if you have a 2-year history of receiving them.
Can I get a mortgage if I'm self-employed?
Yes, but lenders typically require 2 years of tax returns to verify income. They use the average of your net business income. If your income has declined year-over-year, lenders may use the lower figure. Having a larger deposit helps compensate for income volatility.
What is PMI and when can I remove it?
Private Mortgage Insurance (PMI) protects the lender if you default. It's required when your loan-to-value (LTV) ratio exceeds 80%. You can request PMI removal once your LTV drops to 80%, and it must be automatically cancelled at 78% LTV under the Homeowners Protection Act.