Home Affordability Calculator
Determine your maximum home purchase price and loan borrowing power without exceeding conventional debt-to-income risk thresholds.
Auto loans, student debt, credit card minimums.
Housing Payment Composition at Maximum Capacity
Worked Example: $120,000 Household Income with $600 Debt
A household earning a combined gross salary of $120,000 per year ($10,000/month) has $600/month in consumer debt payments (auto loan + student loan) and $60,000 in cash savings. They apply conventional 28/36 underwriting guidelines with a 30-year fixed loan at 6.75% APR.
| Underwriting Step | Calculation Rule | Result |
|---|---|---|
| Gross Monthly Income | $120,000 annual income ÷ 12 months | $10,000.00 |
| Front-End Housing Limit (28%) | $10,000 × 28% maximum housing cap | $2,800.00 |
| Total Allowed Debt (36% Back-End) | $10,000 × 36% maximum debt cap | $3,600.00 |
| Less Existing Consumer Debt | Auto and student loan commitments | −$600.00 |
| Back-End Housing Ceiling | $3,600 − $600 | $3,000.00 |
| Binding Housing Payment Limit | min(Front-End $2,800, Back-End $3,000) | $2,800.00 |
| Maximum Mortgage Borrowing Power | Principal supported by $2,800 PITI at 6.75% + 1.15% tax | $340,659.00 |
| Plus Available Down Payment | Cash equity deployed | +$60,000.00 |
| Maximum Home Purchase Price | $340,659 loan + $60,000 down payment | $400,659.00 |
Mortgage Qualification & DTI Framework
Mortgage lenders evaluate affordability through two primary metrics: the front-end ratio (housing expenses alone divided by gross income) and the back-end ratio (all monthly debt payments combined divided by gross income).
Under Fannie Mae and Freddie Mac standards, conventional qualified mortgages (QM) adhere to the 28/36 benchmark. Federal Housing Administration (FHA) loans permit up to 31/43 (or up to 50% with automated underwriting approvals for borrowers with pristine credit reserves).
Exclusions & Underwriting Factors
- Credit Score (FICO): Qualifying for the best mortgage rates requires a credit score of 740 or higher. Minimum conventional threshold is 620.
- Post-Closing Asset Reserves: Many lenders require 2 to 6 months of mortgage payments in liquid reserves (checking, savings, non-retirement) remaining after closing.
- Two-Year Income Stability: Commission, bonus, and 1099 self-employment income require a verified two-year history on federal tax returns.
Méthodologie de calcul
Applies Fannie Mae and Freddie Mac conservative 28% front-end and 36% back-end debt-to-income limits.
Shows maximum affordable purchase price, maximum loan amount, PITI payment breakdown, and recommended closing cost reserves.
Frequently Asked Questions (FAQ)
What is the 28/36 rule in mortgage underwriting?
Lenders prefer housing expenses not exceed 28% of gross monthly income, and total debt payments (housing plus existing loans) not exceed 36%.
How does existing consumer debt reduce my buying power?
Every dollar committed to student loans, car financing, or credit cards reduces your back-end borrowing capacity dollar-for-dollar.
What is the difference between front-end and back-end DTI?
Front-end DTI evaluates housing costs alone against gross income. Back-end DTI encompasses housing plus all recurring debt payments.