House Affordability Calculator
Estimate the maximum home price you can afford based on income.
Formula
Max Payment = Income×28% – Debts; solve for loan
Example
$100K income, $500 debts, $50K down, 6.5% → ~$427K max home.
How much house you can afford is decided by lenders using the 28/36 rule, but real-world affordability is decided by what you can sustainably pay every month. Mortgage payment is rarely your full housing cost — taxes, insurance, PMI, HOA, and maintenance often add 30-50% to the monthly figure most calculators show.
The 28/36 rule explained
Lenders use two ratios: housing costs should not exceed 28% of gross income, and total debt (housing + cars + cards + student loans) should not exceed 36%. For a $6,000/mo gross income, this means max $1,680 housing + $480 other debt.
How a $6,000/mo gross income breaks down
Hidden costs that turn affordable into stretched
| Cost | % of home value/yr | $400K home/mo |
|---|---|---|
| Property tax | 0.5–2.5% (varies by state) | $200–$830 |
| Homeowner's insurance | 0.3–0.8% | $100–$265 |
| PMI (under 20% down) | 0.5–1.5% of loan | $170–$500 |
| HOA fees (if applicable) | — | $0–$1,000 |
| Maintenance & repairs | 1–3% of value | $330–$1,000 |
| Utilities | — | $150–$400 |
| Total above P&I | — | $950–$4,000/mo |
Down payment impact on monthly cost
| Down % | Loan ($400K home) | P&I (30y at 7%) | PMI? |
|---|---|---|---|
| 3% | $388K | $2,583 | Yes (~$160/mo) |
| 10% | $360K | $2,396 | Yes (~$150/mo) |
| 15% | $340K | $2,263 | Yes (~$140/mo) |
| 20% | $320K | $2,129 | No |
| 25% | $300K | $1,996 | No |
Five rules for sustainable affordability
- 30% net rule. Total housing ≤ 30% of take-home pay (stricter than the lender's 28% of gross).
- 3× rule. Home price ≤ 3× annual gross income. 5× is the historical maximum sustainable.
- 6-month emergency fund first. Cover all-in housing costs from savings before buying.
- 5-year time horizon. If you might move sooner, renting usually beats buying after closing costs.
- 1% maintenance reserve. Set aside 1% of home value yearly for repairs.
Calculating your real cost of ownership over 5 years
The "lifetime cost" of a home isn't the mortgage payment times 360 months. It's the sum of every dollar that leaves your bank account because of the house — mortgage interest, taxes, insurance, maintenance, utilities, opportunity cost on your down payment, and transaction costs to buy and eventually sell.
For a typical $400,000 home with 20% down, 30-year mortgage at 7%, here's the 5-year cost breakdown:
| Cost category | 5-year total | Annual average |
|---|---|---|
| Mortgage interest paid (5 yrs) | $108,000 | $21,600 |
| Principal paid (becomes equity) | $22,000 | $4,400 |
| Property taxes (1.25% avg) | $25,000 | $5,000 |
| Homeowner's insurance | $8,000 | $1,600 |
| Maintenance (1.5% of value/yr) | $30,000 | $6,000 |
| Utilities premium vs apartment | $12,000 | $2,400 |
| Closing costs (paid at purchase) | $12,000 | — |
| Selling costs (6% commission + fees) | $26,000 | — |
| Opportunity cost on $80K down payment* | $32,000 | $6,400 |
| Total 5-year cost | $253,000 | $50,600/yr |
*Opportunity cost = what $80,000 would have earned in a 7% investment over 5 years
This works out to roughly $4,200/month all-in on a $400K home — significantly more than the $2,129 P&I payment most people think about. Compared to renting an equivalent property at $2,500-3,000/month, the buy decision only "wins" if home appreciation exceeds about 3-4% per year. In flat or declining markets, renting is the clear winner.
Hidden costs of homeownership most buyers underestimate
Maintenance is the largest hidden cost. The classic rule is "1% of home value per year" but this understates real costs in older homes. A 30-year-old home accumulates major-system replacements over time:
| System | Typical lifespan | Replacement cost |
|---|---|---|
| Roof (asphalt shingle) | 20-25 years | $8,000-25,000 |
| HVAC (full replacement) | 15-20 years | $5,000-15,000 |
| Water heater | 10-15 years | $1,500-4,000 |
| Major appliances (each) | 8-15 years | $800-3,000 |
| Driveway / hardscape | 20-30 years | $5,000-15,000 |
| Exterior paint | 7-10 years | $4,000-12,000 |
| Windows (full replacement) | 20-30 years | $10,000-25,000 |
A 20-year-old home will likely need 2-3 of these items in the first 5-10 years of ownership. Building a "house fund" with 1.5-2% of home value annually is realistic; 1% is optimistic.
When buying definitely beats renting
- You'll stay 7+ years. The break-even on closing costs and selling costs requires this minimum horizon in most markets.
- You can afford a 25%+ down payment. Avoids PMI and gives you negotiating power; rates also better with more equity.
- You have a stable, recession-resistant income. Job loss with a mortgage is much harder to manage than job loss with a lease.
- Local rent-to-price ratio favors buying. If annual rent for an equivalent home exceeds about 7-8% of purchase price, buying tends to win mathematically.
- You want to renovate / personalize. Renters can't recover renovation costs; owners can.
- Mortgage rate is below 5%. At sub-5% rates, the math overwhelmingly favors owning. At 7%+ current rates, it's close.
When renting definitely beats buying
- You're likely to move within 5 years. Transaction costs alone (10-12% of value combined buy + sell) wipe out short-term appreciation.
- Your career requires flexibility. Selling under deadline pressure usually means accepting lower prices.
- You can't afford 6+ months emergency fund AFTER down payment. The all-in housing cost stress without reserves is one of the leading triggers of foreclosure.
- Local rents are unusually low vs prices. Some metro areas have rent-to-price ratios near 4%, making renting the obvious choice even for long-term residents.
- You're early in your highest-earning years. Maxing 401(k), HSA, and Roth IRA usually beats mortgage equity for total wealth building.
Common mistakes
- Using gross income instead of net. Federal + state + FICA take 20-35%; affordability based on gross overstates capacity.
- Forgetting closing costs. 2-5% of purchase price upfront.
- Ignoring opportunity cost. $80K down payment is also $80K not earning 7% — ~$600K lost growth over 30 years.
- Underestimating property tax. NJ, IL, NH, TX can hit 2-3% of home value.
Questions and answers
Pre-qualified vs pre-approved?
Pre-qualification is an estimate based on self-reported numbers. Pre-approval involves credit check and documented income — gives sellers confidence. Always get pre-approved before serious shopping.
Should I put down 20% or finance more?
20% avoids PMI. With rates above 6%, paying down usually beats investing the difference. With rates below 5%, financing more may be optimal.
How does interest rate change affordability?
Every 1% increase reduces buying power by ~10-12%. A buyer qualified for $400K at 5% qualifies for ~$360K at 6%.
Sources
- Consumer Financial Protection Bureau: Know Before You Owe
- Fannie Mae & Freddie Mac: underwriting guidelines
- National Association of Realtors: home affordability index
Related: Mortgage · PMI · Debt-to-Income · Rent vs Buy