Home Affordability Calculator

Figuring out how much house you can afford can feel like playing The Price Is Right. Get it right, and you move into your dream home. Get it wrong, and you’re back to being a spectator in the audience.

Complicating matters even further, the sticker price you see on a house doesn’t tell the whole story. There are other costs that affect your monthly payment. A home affordability calculator can help remove some of the guesswork.

How a Home Affordability Calculator Can Help You

Our home affordability calculator provides a convenient way to estimate how much home you can buy and what your monthly payments might look like. The calculator lets you start by using your annual income or by entering the maximum monthly payment you think you can handle. You can try both using the toggle feature at the top.

For a quick, ballpark estimate, enter your annual income, monthly debts, and a down payment amount. The home affordability calculator will add some typical additional costs, such as property tax and homeowners insurance.

To refine your estimate, click the “Advanced Options” link. The calculator will expand so you can adjust and exclude costs depending on your situation.

Keep in mind, your actual loan terms and affordability will depend on your credit score, debt-to-income ratio (DTI), and lender criteria. For a more personalized estimate, consult with a qualified mortgage professional or financial advisor.

11 Factors That Determine Affordability

Lenders need to know that you can reasonably afford your monthly payments. Here’s what they look at:

1. Income: This is your gross annual income before taxes. Lenders will look at all sources of income for you and your co-borrower, such as salary, bonuses, and other regular earnings.
2. Debts: How much of your income is going toward monthly minimum debt payments? Examples include credit card debt, student loan debt, and car payments. 
3. DTI ratio: A good debt-to-income (DTI) ratio is 36% or lower. Many lenders use 43% as an upper limit, but a lower DTI indicates stronger financial health and can result in better interest rates. DTI requirements vary by loan type.
4. Credit score: A credit score of 620 or higher is generally needed for loan approval. A score of 670 or higher secures better interest rates and loan terms. However, a specific score isn’t a universal cutoff. Requirements vary by lender and loan type, with some programs allowing scores as low as 580 or less.
5. Down payment: Your down payment affects your interest rate and your monthly mortgage payments. Putting down at least 20% helps you avoid paying private mortgage insurance (PMI), but some loan programs allow homebuyers to put down as little as 3% — or even none at all. To plan your budget, try our Down Payment Calculator.
6. Mortgage interest rate: The mortgage interest rate you’re offered depends on your credit score, down payment amount, and other details of your home purchase. And that rate can have a big impact on your home affordability. The lower the rate, the lower your monthly payments.
7. Loan term: Most 10- or 15-year loans have lower interest rates than traditional 30-year loans. Shorter-term loans come with higher monthly payments, but you’ll pay less interest over the life of the loan because you’re holding it for less time.
8. Homeowners insurance: Mortgage lenders require borrowers to have homeowners insurance to protect the house and the loan agreement. For the average homeowner, this can add between $1,800 and $2,200, and even higher in disaster-prone regions.
9. Mortgage insurance: If you use a conventional loan and don’t put down 20%, you’ll likely be on the hook for private mortgage insurance (PMI). PMI protects the lender in case you stop making payments on your loan. Our home affordability calculator lets you see how your monthly numbers look both with and without PMI.
10. Homeowners association fees: Lenders account for HOA fees when determining your maximum monthly mortgage payment. Keep this in mind if you’re eyeing neighborhoods that charge monthly maintenance or membership fees.
11. Property taxes: Effective property tax rates vary by location. Typical costs range from 0.5% to 2.5% of a home’s value. You’ll find many online resources and calculators to learn more about property taxes in your target area.

Home Affordability FAQs

What’s the difference between prequalified and preapproved?

Pre-qualification is a ballpark estimate a lender gives you when you share self-reported information, including your income, credit score, and down payment amount. Because they’re unverified, pre-qualifications are typically offered quickly. Preapproval, on the other hand, gives you a more concrete estimate based on a more rigorous inquiry into your finances and records. Getting preapproved can help you make stronger offers and move faster once you find a home.

What’s the 28/36 rule?

The 28/36 rule is a budgeting guideline suggesting you spend no more than 28% of your gross monthly income on housing costs and no more than 36% on total debt payments, including your mortgage, car loans, and credit cards. For example, if you earn $6,000 a month before taxes, the 28/36 rule means your monthly housing costs should be no more than $1,680 (28% of $6,000), and your total debt payments shouldn’t exceed $2,160 (36% of $6,000).

How do I get the best interest rate?

One way to fast-track getting a good interest rate is beefing up your credit score. Borrowers with credit scores of 760 or higher tend to get the best rates. A perfect FICO score is 850, but most experts say you don’t need to reach that target to qualify for the lowest rates.

How can an FHA loan make buying a home more affordable?

An FHA loan can make buying a home more affordable by lowering the upfront costs and easing qualification requirements. Backed by the Federal Housing Administration, it allows buyers to put down as little as 3.5% with a credit score of 580 or higher and offers more flexible credit standards than most conventional loans. Although borrowers must pay mortgage insurance, the lower down payment and easier approval process can help more buyers qualify for a home sooner.

How can a VA loan make buying a home more affordable?

A VA loan can make homeownership more affordable for eligible veterans, active-duty service members, and certain surviving spouses. Backed by the U.S. Department of Veterans Affairs, it typically requires no down payment or private mortgage insurance and offers competitive interest rates. These benefits can significantly reduce your upfront and monthly costs, making it easier to purchase a home.

How much are closing costs?

Closing costs usually range from 2% to 5% of your home’s price and cover fees like the appraisal, title search, lender charges, and escrow. On a $400,000 home, that’s roughly $8,000–$20,000. Some fees are negotiable, and buyers can often request seller credits to offset costs.

Partner With a Top Agent to Find a Home That Fits

If you’re considering jumping into the homeownership game, hire an agent with a proven record for helping first-time buyers. The right agent will know about local downpayment or housing assistance programs and help you find a home that fits your needs and your budget.

HomeLight’s free Agent Match tool can connect you with the top local agents in your desired location. Along with our Home Affordability Calculator, here are some additional resources to explore:

• 7 First Steps When Buying A Home
• 25 First-Time Home Buyer Tips
• 16 First-Time Homebuyer Programs
• How Does a Mortgage Work?
• What Makes Mortgage Rates Go Down?
• How to Increase Your Preapproval Amount

To learn more, visit HomeLight’s Homebuyer Resource Center, where you can search for answers to any question that’s on your mind.

Writer Scott Dylan Westerlund contributed to this post.