In short
Lenders look at how much of your income goes on debt. This calculator takes the share of gross income you allow for all debt payments, subtracts your existing debts and property costs, and works out the largest mortgage the rest can repay. Add your down payment and you have the price you can afford.
The debt-to-income rule
Debt-to-income (DTI) is your total monthly debt payments divided by your gross monthly income. In the US many lenders want it at or below 36%, and some accept up to about 43% or more. Other countries use different measures, such as income multiples in the UK or a share of net income in India, so check what lenders near you use. A lower limit leaves more room for saving and surprises.
A common rule of thumb, the 28/36 rule, also says housing alone should stay under 28% of gross income. The calculator applies one limit at a time: to check both, also run it at 28% with other debts set to 0, and take the lower price.
Worked example
On an income of 90,000 a year, a 36% limit allows 2,700 a month for all debts. Take away 400 of car and card payments and 450 of property tax and insurance, and 1,850 is left for the mortgage.
At 6.5% over 30 years, 1,850 a month repays a loan of about 292,690. With a 60,000 down payment, you can afford a home of about 352,690.
How to afford more
Paying off a car loan or credit card frees up the most room: every 100 a month less in debt adds roughly 15,800 to the loan at 6.5% over 30 years. A bigger down payment and a lower rate help too.
Being able to borrow an amount is not the same as being comfortable repaying it. Check the monthly housing cost against your real budget.
Frequently asked questions
Is this what a bank will lend me?
It is an estimate using a simple rule. Lenders also look at your credit history, job, savings and their own limits, which differ between countries and loan types.
Should I use gross or net income?
In the US, lenders set debt-to-income limits on gross income, before tax, and this calculator follows that convention. Some countries use net income instead. Either way, your budget depends on what you actually take home.
What counts as other debt payments?
Minimum payments on credit cards, car loans, student loans, personal loans and any other regular debt. Everyday bills such as food and utilities are not included.
Why does the result drop to the down payment?
If your debts and property costs already take up the whole limit, nothing is left for a mortgage. The calculator then flags your debts so you can adjust them or the limit.
Methodology
Allowed payment = gross monthly income × limit − other debts − property costs. The mortgage is the present value of that payment: L = P × (1 − (1 + r)^−n) / r, with r the monthly rate and n the number of months. Home price = mortgage + down payment.
This calculator gives estimates for information only and is not financial advice. Lenders decide using their own criteria.
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