House Affordability Calculator
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DTI Guidelines
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How Much House Can You Afford?
Understanding Home Affordability
Determining how much house you can afford involves balancing your income, existing debts, and the true cost of homeownership. Lenders use specific ratios to evaluate your ability to repay a mortgage, but your personal comfort level may differ from what you qualify for.
The 28/36 Rule
Most financial advisors recommend spending no more than 28% of your gross monthly income on housing costs and no more than 36% on total debt payments. This leaves room for savings, emergencies, and other financial goals.
What Lenders Consider
Front-End DTI (Housing Ratio)
Your total monthly housing costs divided by gross monthly income. Includes:
- Principal and interest (P&I)
- Property taxes
- Homeowners insurance
- HOA fees (if applicable)
- PMI (if down payment < 20%)
Back-End DTI (Total Debt Ratio)
All monthly debt payments divided by gross monthly income. Includes:
- Housing costs (above)
- Car loans
- Student loans
- Credit card minimum payments
- Other loan obligations
DTI Requirements by Loan Type
| Loan Type | Front-End Max | Back-End Max | Notes |
|---|---|---|---|
| Conventional | 28% | 36-43% | Higher with strong credit/reserves |
| FHA | 31% | 43% | More flexible for first-time buyers |
| VA | N/A | 41% | No front-end requirement |
| USDA | 29% | 41% | Rural property requirement |
True Cost of Homeownership
The mortgage payment is just one part of homeownership costs. Budget for these additional expenses:
Tips for Home Buyers
Before You Buy
- Get pre-approved to know your budget
- Save for closing costs (2-5% of price)
- Build emergency fund (3-6 months)
- Check your credit score
- Pay down existing debts
Common Mistakes
- Buying at the maximum approval
- Forgetting closing costs
- Ignoring maintenance costs
- Not comparing lenders
- Skipping home inspection
Important Note
What you can afford and what you qualify for may be different. Lenders may approve you for more than is financially comfortable. Consider your lifestyle, savings goals, and job security when deciding how much to spend on a home.
Frequently Asked Questions
How much house can I afford on my salary?
A common guideline is 2.5-3 times your annual gross income, but this varies based on debts, down payment, and interest rates. More precisely, follow the 28/36 rule: spend no more than 28% of gross monthly income on housing costs and 36% on total debt. For a $100,000 salary, this suggests a maximum home price around $250,000-$350,000 depending on your other debts.
What is the 28/36 rule for home buying?
The 28/36 rule suggests spending no more than 28% of gross monthly income on housing costs (mortgage, taxes, insurance, HOA) and no more than 36% on all debt payments combined (housing plus car loans, student loans, credit cards). This leaves room for savings and other expenses while keeping your finances manageable.
What factors affect how much house I can afford?
Key factors include: your gross income, existing monthly debts, credit score (affects interest rate), down payment amount, current mortgage rates, property taxes and insurance costs in your area, and HOA fees if applicable. A larger down payment or lower interest rate can significantly increase your buying power.
Should I buy the maximum house I can afford?
Generally, no. Lenders may approve you for more than is financially comfortable. Consider your lifestyle, job security, future expenses (children, career changes), and savings goals. Many financial advisors recommend staying well under your maximum to maintain financial flexibility. Remember: mortgage payment is just one cost of homeownership.