Home Affordability Calculator

The 28/36 rule is a traditional guideline for home affordability. It suggests that your housing expenses should not exceed 28% of your gross monthly income (front-end ratio), and your total debt payments should not exceed 36% (back-end ratio or DTI). Modern lending often allows higher ratios, especially for borrowers with strong credit and assets.

While 20% down is ideal to avoid PMI, many buyers purchase with less. FHA loans require just 3.5% down, conventional loans can be as low as 3%, and VA/USDA loans offer 0% down options. However, larger down payments mean lower monthly payments and better loan terms. Don't forget to budget for closing costs (2-5% of home price) and moving expenses.

Lenders include all recurring monthly debt obligations: mortgage/rent, car loans, student loans, personal loans, credit card minimum payments, and child support/alimony. They typically don't include utilities, groceries, insurance (except mortgage insurance), or other living expenses. This is why the calculator shows a maximum - you need to budget for all your other expenses too.

Your credit score significantly impacts the interest rate you'll receive. A difference of just 1% in interest rate can change your monthly payment by hundreds of dollars. For example, on a $300,000 loan, the difference between a 6% and 7% rate is about $180 per month or $65,000 over 30 years. Check your credit score before house hunting and work to improve it if needed.

Just because you can afford a certain amount doesn't mean you should spend it all. Consider your other financial goals: retirement savings, emergency fund, travel, entertainment, and unexpected expenses. Many financial advisors recommend spending 25-30% less than your maximum approval to maintain financial flexibility. Remember, homeownership comes with additional costs beyond the mortgage: maintenance, repairs, utilities, HOA fees, and furnishings.

Self-employed borrowers can absolutely get mortgages, but lenders typically require 2 years of tax returns to verify income. They'll use your average income after business expenses. If you have irregular income (commissions, bonuses, seasonal work), lenders usually average it over 2 years. To improve your chances: maintain detailed financial records, minimize business deductions before applying, and consider working with lenders who specialize in self-employed borrowers.