How Mortgage Affordability Is Calculated
Lenders use two key ratios to determine how much mortgage you qualify for — and both are built into this calculator:
- Front-End DTI (28% rule): Your total housing payment (principal, interest, taxes, insurance) should not exceed 28% of your gross monthly income.
- Back-End DTI (36–43% rule): All monthly debt payments combined (housing + car + student loans + credit cards) should not exceed 36%–43% of gross income.
For example, if you earn $7,500/month and have $400 in monthly debt payments, a lender will typically approve a housing payment up to roughly $1,825/month — which translates to approximately a $300,000 home purchase price at current 2026 rates.
What Is Included in a Monthly Mortgage Payment?
- Principal & Interest (P&I): The core loan repayment.
- Property Taxes: Varies by county, typically 1%–2% of home value annually.
- Homeowner's Insurance: Required by lenders, typically $100–$200/month.
- PMI: Required if your down payment is below 20%, typically 0.5%–1% of the loan annually.
Frequently Asked Questions
- How much house can I afford on my salary?
- Apply the 28% rule to your gross monthly income. Our calculator does this automatically and factors in your debts for accuracy.
- What factors affect affordability?
- Income, monthly debts, down payment, interest rate, property taxes, and homeowner's insurance — all captured in this calculator.