How much house can I afford?

What this tells you

This gives you a starting number: roughly what a home could cost, if your housing payments stayed inside a pair of limits meant to leave you room to live. It is a rough sketch, not a decision, and not an amount anyone has offered to lend you.

The number moves a lot with small changes to the interest rate, to what you spend each year, and to how much of the price you put down in cash. That is worth seeing for yourself. Change one field at a time and watch what happens.

How to use it

Start with income before tax for everyone who will be on the mortgage.

For yearly expenses, add up what the household actually spends in a year — food, transport, insurance, childcare, loan and card payments, holidays, everything — and leave rent out of the total. Rent is left out because the housing payment is what replaces it. If you have never added this up, a bank statement over three months multiplied by four is close enough to start with.

Net worth is what your savings and investments are worth today, minus what you owe. This is the pot your down payment comes out of.

For the expected return, use what you think that money will earn in a year. If you are not sure, leave it at the default and change it later to see how much it matters.

Use an interest rate you could actually obtain today. If you are comparing loan terms, change the term while leaving the other figures alone.

How your savings change the answer

Most affordability calculators ask for a down payment as a fixed pile of cash and stop there. This one asks for your whole net worth instead, and asks for the down payment as a percentage of the price. That changes the question in three ways.

Your savings set a ceiling. At 20% down, a $600,000 house needs $120,000 in cash. If your net worth is $90,000, that house is out of reach no matter what you earn. The calculator will not suggest a price that needs more cash than you have, and it says so in a note when that is the limit you have hit.

What you do not put down keeps earning. Money left invested produces a return, and this calculator counts that return as income — the same way your pay is counted. More income means the limits allow a larger housing payment.

So the down payment is a trade, not just a number. Put more down and the loan gets smaller and the mortgage payment falls. But that money leaves the market and stops earning, so the income side of the calculation falls too. Move the down payment slider and watch the maximum price: for many people it does not move nearly as much as they expect, because the two effects pull against each other.

One thing to be clear about: the calculator treats your investment return as money you draw out and spend each month. That is why the Net worth still invested line on the chart is flat rather than growing. You cannot both spend the return and have it compound, and this tool assumes you spend it.

How to read the result

Maximum purchase price includes your down payment. Cash you would put down is your percentage applied to that price, and Amount borrowed is the rest.

Monthly housing payment combines the loan payment with estimated property tax and home insurance. It does not include the costs listed later in this explainer.

Net worth still invested is what is left after the down payment, and Monthly income from those investments is one month of your expected return on it. Total monthly income counted adds that to your pay. Both limits are worked out from that figure.

Left over each month is what remains after your other expenses and the housing payment. It is never zero, because the second limit deliberately leaves at least a fifth of your surplus uncommitted.

Total interest assumes you keep the mortgage for the whole term and make every scheduled payment.

The chart shows two lines: what you would still owe after each year, and what stays invested. Where they cross is the year your remaining mortgage falls below your remaining savings. The first-year table below shows how each payment splits between interest and principal.

The words this uses

Gross income is what you earn before tax and before anything else comes off your pay. Lenders work in gross income because it is easy for them to verify. It is not the money that arrives in your account, so a payment that fits inside these limits can still feel tight in real life.

Net worth is everything you own that is worth money, minus everything you owe.

Down payment is the cash you put toward the price yourself. The rest is the mortgage. Here it is entered as a percentage of the price rather than a fixed amount.

Principal is the amount you borrowed. Interest is what the lender charges you for borrowing it.

PITI stands for principal, interest, taxes and insurance. It is the four things that usually make up a monthly housing payment. Property tax goes to your local government. Home insurance covers damage to the building. Lenders often collect all four together in one monthly payment.

Amortization is the way a mortgage is paid off: the same payment every month, but the split inside it changes. Early on, most of it is interest. Later, most of it is principal. The table below the chart shows this for the first year, and it can be startling the first time you see it.

Term is how many years the loan runs for.

The limits this uses

Three, and whichever leaves least room is the one that applies.

The first is the 28% rule. Your total housing payment stays at or below 28% of the monthly income counted here. The FDIC states this as 25% to 28%; this calculator uses 28%, the more generous end. Housing payment means all four parts of PITI, not just the loan.

The second is a surplus limit. Take the income counted here, subtract your other yearly expenses, and the housing payment may use at most 80% of what is left. The remaining fifth stays yours.

You may have seen the 28/36 rule, whose second half limits housing plus long-term debt payments to 36% of gross income. This calculator asks for total yearly expenses instead of debt payments, and those are not the same thing — a household spending $45,000 a year on $120,000 of income is completely ordinary, and 36% of gross income cannot contain it. So the second limit is stated as a surplus test instead. The 80% is a margin chosen for this calculator, not a published lending standard, and it is the number here you should feel most free to disagree with. The idea behind it — that what a household has left over after housing matters more than a ratio — is an established one, and the VA uses a version of it in its own lending rules.

The third is simply your cash. The down payment cannot be larger than your net worth.

These are rules of thumb, not law and not any lender's actual policy. Plenty of lenders approve borrowers well beyond them. That does not make those loans comfortable, which is why limits like these exist.

What this does not include

• Closing costs. Fees paid at the point of sale, typically some percent of the price, on top of your down payment. They are not in the figure above.
• Mortgage insurance, often called PMI. If your down payment is under 20% of the price, lenders usually add a monthly charge. It can be a hundred dollars a month or more, and it is not in the figure above. Since you can set the down payment below 20% here, this matters: at a low down payment the price above reads high.
• Tax on your investment income, and any tax you may owe on selling investments to raise the down payment. Both are real and neither is modelled.
• Investment returns that vary. The expected return is treated as a steady yearly figure. Real portfolios have good years and bad ones, and a bad one early on is not shown here. A return you are confident of is worth far more than a high one you are not.
• HOA or condo fees. If the home has them, they are a real monthly cost and they are not here.
• Maintenance and repairs. A roof, a boiler, a leak. Nobody can put a number on this in advance, and no percentage rule for it is reliable, so none is used.
• Utilities, which often go up when you move from a rented flat to a house.
• A variable rate. This assumes one fixed rate for the whole term. If your rate can change, your payment can change, and this calculator cannot show that.
• Your actual property tax and insurance bill. These are estimated at 1.25% of the price a year, a national average. Real rates vary enormously by state and by county: from under 0.3% to over 2% for property tax alone. If you know your local rate, treat the number above as approximate in that direction.
• Anything about you. Your credit history, how long you have held your job, whether your income is steady, what a lender in your area is actually offering.

Common questions

A lender told me I can borrow more than this. Who is right?

A lender may use different ratios, and will not count your investment income or your spending the way this does. What a lender will approve and what leaves you room to live are different questions with different answers. These limits give you a conservative starting point for the second one.

Why does raising the down payment barely change the maximum price?

Because it does two opposite things at once. A bigger down payment means a smaller loan and a smaller monthly payment, which supports a higher price. But the cash comes out of your investments, so you lose the income they were producing, which supports a lower price. Depending on your interest rate and expected return, either can win.

Why does the number go down when I raise the interest rate?

Because the monthly payment you can afford does not change, but a higher rate buys less with it. Your income sets the payment; the rate sets how much house that payment reaches.

Why does a 15-year term give a much smaller number than 30?

Same reason. A shorter term means each payment has to cover more principal, so the same affordable payment supports a smaller loan. A 15-year mortgage costs far less in total interest, which you can see in the total interest figure, but it buys less house today.

Why is the "still invested" line on the chart flat?

Because the calculator counts your investment return as income you draw and spend each month. If you spend the return, the amount invested stays where it is. If you would rather leave it to compound, then it is not income and should not be counted toward the housing payment — so this tool picks one and tells you which.

Why is the answer zero?

Three things can cause it. Your yearly expenses may be as large as your income and investment income together, leaving no surplus. Or you may have entered no income and no net worth at all. Or your net worth may cover no part of a down payment at that percentage. The note under the result says which one applies. In each case it is a statement about these limits, not about you.

Should I spend the maximum?

The number above is a ceiling under one set of limits, not a target. Nothing here can tell you what is comfortable for your household, and nobody is required to spend up to a ceiling.

Does the tool store what I type?

The calculator does not send an application request when you edit a field, and it uses no account, cookie or local storage for your figures. It writes changed values into the page address so you can bookmark or share the result. A browser can retain that address in its history, and opening or sharing it sends the address in the normal way a web page is requested.