To figure out how much home you can afford with our calculator, enter your gross annual income and total monthly debts, choose a down payment amount and select a loan term.
LendingTree’s calculator defaults to a 30-year fixed-rate mortgage, but there’s a 15-year fixed-rate term option if you want to save on interest charges and can afford a higher monthly payment.
Our calculator is preset to a “conservative” 28% DTI ratio; most lenders set a maximum DTI limit between 41% and 45%. You can slide the bar up to an “aggressive” 50% DTI ratio if you’re willing to make room in your budget for a higher payment.
It’s harder to qualify for a high-DTI loanIf you carry a lot of debt, lenders may require a higher credit score or extra mortgage reserves to cover a few month’s worth of mortgage payments.
Home affordability comes down to two things:
Understanding the difference — and then using a home affordability calculator to crunch some numbers — will help you decide how much house you can really afford.
Your debt-to-income (DTI) ratio
Lenders divide your total monthly debt payments by your income to determine whether or not you can afford another loan.
Your loan term
A 30-year fixed-rate mortgage offers the lowest stable payment. If you choose a 15-year fixed-rate term, you’ll save money on interest, but won’t qualify for as much house.
Your interest rate
Higher mortgage rates mean higher monthly payments. So the higher your rate, the less house you’ll be able to afford.
Lenders will look at your salary when determining how much house you can qualify for, but you’ll need to look at the big picture — your actual take-home pay and monthly expenses — to determine whether that much house is truly affordable.
Here’s a breakdown of what that means:
Financial planners often mention the “28/36 rule” when it comes to home affordability.
→ The 28 is a recommended DTI ratio for your monthly mortgage payment compared to your gross monthly income. Lenders call this your “front-end” DTI ratio.
→ The 36 is a recommended DTI ratio for your mortgage payment, plus any other debt like auto loans, credit cards, student loans or other accounts that appear on your credit report. This is your “back-end” DTI ratio.
Here’s how the 28/36 rule works, assuming you make $6,250 per month ($75,000 per year) before taxes.
| What you want to know | Calculation step | The math | What the results mean |
|---|---|---|---|
| If my “front-end” DTI ratio is 28%, what monthly payment can I afford? | Multiply your monthly income by 28% | 6,250 x 0.28 = $1,750 | Your monthly mortgage payment, including taxes and insurance, shouldn't exceed $1,750. |
| If my “back-end” DTI ratio is 36%, what monthly payment can I afford? | Multiply your monthly income by 36% | 6,250 x 0.36 = $2,250 | Your total monthly debt, including your mortgage payment, shouldn't exceed $2,250. |
BOOST YOUR CREDIT SCORE
Keep your credit card balances low, pay everything on time and avoid opening a lot of new credit accounts. A higher credit score will get you a lower interest rate, which equals a lower monthly mortgage payment.
MAKE A BIGGER DOWN PAYMENT
Your loan amount and mortgage payment will be lower with a larger down payment. The full amount doesn’t have to be from your own funds, however. You can get a gift from a relative, take out a 401(k) loan or combine your down payment with down payment assistance programs.
GROW YOUR MONTHLY INCOME
Don’t forget your side hustle income — you can use it to help you qualify for a loan, as long as your tax returns show part-time income for the last two years. Plus, two incomes are better than one, so if you can cosign the mortgage with someone you’ll have more borrowing power.
REDUCE YOUR MONTHLY DEBT
The less debt you have, the more house you can afford. If your DTI ratio is holding you back, consider putting a lump sum toward an outstanding personal loan balance, or selling a car and paying off the auto loan.
CHOOSE A LONGER LOAN TERM
You’ll be able to afford a bigger home with a longer repayment term, such as 30 years. However, if the higher monthly payment doesn’t strain your monthly budget, a shorter term can save you thousands in interest charges.
CONSIDER DIFFEERENT LOAN PROGRAMS
Government-backed loan programs may allow for a higher DTI ratio than conventional loans, even if you have a low credit score. Still, they come with higher mortgage insurance costs or guarantee fees that could affect how much you can afford.
