Mortgage Calculator — How Much House Can I Afford?
Estimate your maximum home price and monthly payment — including taxes, PMI, and insurance — based on your income, down payment, and debt.
How Much House Can I Afford?
Determining how much house you can afford involves more than just the sticker price. Your income, monthly debts, down payment, credit score, and interest rate all play a role. Use the calculator above to explore different scenarios and find a price that fits your budget without financial strain.
Income and Debt-to-Income Ratio
Your income is the starting point for determining what you can afford. Lenders evaluate your gross income to calculate your debt-to-income ratio (DTI), which compares your total monthly debts to your earnings.
To calculate your DTI, divide your monthly debt payments by your gross monthly income. For example, if you pay $2,400 toward debts and earn $8,000 each month, your DTI is 30%. Most lenders require a DTI below 45%–50% with anticipated housing costs included.
A lower DTI means a healthier financial position and better odds of qualifying for favorable mortgage terms.
Credit Score and Interest Rates
Your credit score directly affects the interest rate you're offered. A higher score can lead to lower rates, potentially letting you afford a more expensive home. A lower score may mean higher rates, a larger required down payment, or the need for private mortgage insurance.
Even a small rate change makes a big difference. On a $360,000 loan, the gap between 6.5% and 7.0% is about $86 per month — or over $31,000 over 30 years. Use the rate slider in the calculator above to see how changes affect your specific numbers.
Down Payment and PMI
Your down payment reduces the principal balance of your mortgage, which lowers your monthly payment. Down payments typically range from 3% to 20% of the sale price. On a $300,000 home, that's anywhere from $9,000 to $60,000.
If your down payment is less than 20%, most lenders require Private Mortgage Insurance (PMI), which typically adds 0.5%–1.5% of the loan amount per year to your payment. Once your loan-to-value ratio reaches 80%, you can request PMI removal.
Programs like FHA loans and VA loans offer lower down payment options for qualified buyers.
Understanding Your Monthly Payment
Your monthly mortgage payment is made up of four components known as PITI: principal, interest, taxes, and insurance. In the early years, most of your payment goes toward interest. Over time, more goes to principal — this is called amortization.
Property taxes vary by location (national average is about 1.1% of home value per year). Homeowners insurance typically costs $1,200–$2,500 annually. Both are usually collected monthly through an escrow account. Use the amortization schedule above to see the full year-by-year breakdown.
Tips for Buying an Affordable Home
- Check your cash flow — Take an honest look at your income and expenses before shopping. Know how a new mortgage fits your monthly budget.
- Factor in all costs — Beyond the mortgage, budget for closing costs (2%–5% of the loan), property taxes, insurance, PMI, and HOA fees.
- Strengthen your finances — Pay down debt, boost your credit score, and save more for a down payment before applying.
- Explore all loan options — Conventional, FHA, VA, and USDA loans each have different requirements and benefits.
- Plan for maintenance — Homeowners typically set aside 1%–4% of the home's value per year for repairs and upkeep.
- Stick to your budget — Keep 3–6 months of savings as a cushion and don't stretch beyond what's comfortable.
Ready to Make an Offer?
Once you know what you can afford, the next step is putting together a strong offer. A well-crafted offer letter shows the seller you're serious and prepared.
Our free home purchase offer letter generator helps you create a professional, ready-to-sign offer letter in minutes — so you can move quickly when you find the right home.