How much house can I afford on my salary?
A common rule of thumb is that you can afford a home priced about 3 to 5 times your annual gross income, but the precise number depends on your debts, down payment, interest rate, taxes, and insurance. This calculator does the exact math using the 28/36 DTI rule so you get a personalized answer rather than a rough multiple.
What is the 28/36 rule?
The 28/36 rule is the classic affordability guideline. Your total housing cost (principal, interest, taxes, insurance, HOA, and PMI) should be no more than 28% of your gross monthly income (front-end DTI), and your total monthly debt obligations including housing should be no more than 36% (back-end DTI). Many lenders allow higher ratios in some programs.
What's the difference between front-end and back-end DTI?
Front-end DTI looks only at housing costs as a percentage of gross income, capping how much you spend on the home itself. Back-end DTI adds all your other monthly debt obligations (car loans, credit cards, student loans) and limits the total. The lower of the two limits determines how much mortgage you can qualify for.
What is PITI?
PITI stands for Principal, Interest, Taxes, and Insurance — the four main components of a mortgage payment. Lenders use total PITI (plus HOA and PMI when they apply) when calculating your front-end DTI, so it's the right number to compare against your income, not just principal and interest.
Do I need a 20% down payment?
Not at all. Conventional loans can go down to 3–5% down, FHA loans to 3.5%, and VA loans to 0% for eligible veterans. However, conventional loans below 20% require Private Mortgage Insurance (PMI), which adds 0.3–1.5% of the loan to your annual cost. A 20% down payment lets you skip PMI entirely.
What is PMI and when does it apply?
Private Mortgage Insurance protects the lender (not you) if your down payment is less than 20%. It typically costs 0.3% to 1.5% of the loan amount annually and is added to your monthly payment. On conventional loans you can usually request PMI removal once you've built 20% equity through payments or appreciation.
Should I include taxes and insurance in affordability?
Yes. Lenders include them in your DTI calculation, and ignoring them is the most common reason buyers think they can afford more than they actually can. Property tax alone can add several hundred dollars per month in high-tax states, which directly reduces the loan amount you qualify for.
What if my back-end DTI is over 36%?
Some loan programs allow higher back-end DTI. Qualified Mortgages permit up to 43%, FHA loans can stretch to 50% with compensating factors like strong credit or large reserves, and jumbo loans are typically stricter. This calculator lets you edit the DTI limits to model different lender guidelines.
How does my credit score affect affordability?
Credit score doesn't change DTI limits directly, but it strongly affects the interest rate you qualify for. Moving from a 680 to a 760+ FICO can drop your rate by 0.5% or more, which materially increases the home price you can afford at the same monthly payment. It also reduces or eliminates risk-based PMI premiums.
How much should I budget for closing costs?
Closing costs typically run 2–5% of the home price in the US, covering lender fees, title insurance, appraisal, taxes, and prepaids. They're separate from the down payment, so plan to have both saved. Some sellers will contribute to closing costs in negotiations, especially in slower markets.
Is 30-year or 15-year better for affordability?
A 30-year mortgage gives you a lower monthly payment and qualifies you for a higher home price. A 15-year mortgage builds equity faster and dramatically cuts total interest paid, but your monthly payment is much higher, reducing the home price you can afford. Most US buyers take 30-year and prepay when they can.
How accurate is this affordability calculator?
The math is precise for the values you enter, using the same DTI rules and mortgage formula lenders use. Real approval depends on the lender's full underwriting — credit, employment, assets, property type, and program-specific rules — so use this as a strong planning tool, then get a pre-approval letter for an exact number.
