How Much Can I Afford Mortgage Calculator USA

Mortgage Affordability Formula:

\[ \text{Affordable Amount} = (\text{Monthly Income} \times 0.28) \times \frac{(1 + r)^n - 1}{r \times (1 + r)^n} \times 12 - \text{Debts} \]

Monthly Income:

Annual Interest Rate:

Loan Term:

years

Monthly Debts:

Affordable Mortgage Amount:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Mortgage Affordability Calculator?

This calculator helps determine how much house you can afford based on your income, debts, current interest rates, and standard lending guidelines (the 28% rule). It estimates the maximum mortgage amount you could qualify for.

2. How Does the Calculator Work?

The calculator uses the standard mortgage affordability formula:

\[ \text{Affordable Amount} = (\text{Monthly Income} \times 0.28) \times \frac{(1 + r)^n - 1}{r \times (1 + r)^n} \times 12 - \text{Debts} \]

Where:

\( \text{Monthly Income} \) — Your gross monthly income before taxes
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of monthly payments (years × 12)
\( \text{Debts} \) — Your total monthly debt payments
0.28 — The 28% front-end debt-to-income ratio

Explanation: The formula calculates the present value of an annuity (your mortgage payments) based on your maximum allowable housing payment.

3. The 28% Rule Explained

Details: Lenders typically recommend that your monthly mortgage payment (including taxes and insurance) not exceed 28% of your gross monthly income. This is known as the "front-end ratio."

4. Using the Calculator

Tips: Enter your gross monthly income (before taxes), current interest rates, desired loan term, and any existing monthly debt payments. The calculator will estimate your maximum affordable mortgage amount.

5. Frequently Asked Questions (FAQ)

Q1: Is the 28% rule strict?
A: While 28% is standard, some lenders may go up to 31% or combine with the 36% back-end ratio (total debt payments).

Q2: What's not included in this calculation?
A: This doesn't account for property taxes, insurance, HOA fees, or closing costs which affect actual affordability.

Q3: Should I borrow the maximum amount?
A: Not necessarily. Consider your lifestyle, savings goals, and potential future expenses before borrowing at your limit.

Q4: How does credit score affect this?
A: Your credit score affects the interest rate you qualify for, which impacts how much you can borrow.

Q5: What about down payments?
A: This calculates mortgage amount only. Your total home budget would be mortgage plus down payment and other costs.