"How much house can I afford" sounds like a single-number question, but it's really the output of a calculation most people never see spelled out: two separate debt-to-income limits, checked against your specific income, debts, interest rate, and down payment, with property tax, insurance, and mortgage insurance all layered in — because those costs scale with the price you're solving for, not a number you can plug in after the fact.
This page explains how that calculation actually works, step by step, before you touch the calculator above — because understanding WHY the number comes out the way it does is what lets you actually move it, rather than just accept it.
Step 1: two ratios, not one
Lenders check two separate limits. The front-end ratio caps your housing costs alone (principal, interest, taxes, insurance, and PMI if applicable) at a percentage of gross monthly income — conventionally 28%. The back-end ratio caps housing costs PLUS all other monthly debt (car loans, student loans, credit card minimums) at a higher percentage — conventionally 36%. Your true affordability ceiling is whichever of these two caps is tighter for your specific numbers.
This is the single most misunderstood part of affordability math. Two people with identical income can have wildly different max home prices if one carries significant other debt and the other doesn't — because the back-end ratio, not just income, determines the ceiling for the person with debt.
Step 2: escrow scales with the price, so it has to be solved, not looked up
Property tax and (below 20% down) PMI are both percentages of the home price or loan amount — meaning they get bigger as the price you're solving for gets bigger. That creates a circular dependency: the maximum price depends on how much room is left after escrow, but escrow depends on the price. This calculator resolves that by iterating toward the price where the numbers are internally consistent, the same way a lender's underwriting software does — not by guessing a tax rate and hoping it's close.
Step 3, the payoff: once the caps and the escrow math are both solved, your result reports not just a number but which cap actually bound (front-end or back-end) and, in the rare case where you've put down close to 20%, whether the real limit is neither DTI cap but the loan-to-value / PMI boundary itself. That's the complete answer to "how much house can I afford" — not a single multiple of income, but a specific number with a specific, checkable reason behind it.
Frequently asked questions
How much house can I afford based on my salary?
It's not salary alone — it's the smaller of your front-end ratio (housing costs at 28% of gross monthly income) and back-end ratio (housing plus all other debt at 36%), solved against your actual rate, down payment, property tax, and insurance. Use the calculator above with your real numbers rather than a flat income multiple.
What is the 28/36 rule for home affordability?
The 28/36 rule caps housing costs at 28% of gross monthly income and total debt (housing plus other debt) at 36%. Whichever cap is tighter for your specific income and debt load determines your max affordable price. See the full 28/36 Rule explainer for how it compares to alternative rules like 25% and 3x-income.
Is there a simple formula for how much house I can afford?
There's a rough rule of thumb (roughly 3–4x annual income), but it breaks down whenever your rate, tax rate, insurance cost, or debt load differ from the averages baked into that multiple. A proper calculation solves the front-end and back-end ratios directly against your real numbers, which is what the calculator above does.
What income do I need to qualify for a $500,000 mortgage?
Roughly $130,000–$150,000 in gross annual income, depending on your down payment, other debt, and rate — enough to clear both DTI caps at a $500,000 loan amount. See the Income to Afford a House calculator for the inverse calculation solved directly for your target price.
Worked examples
Worked example 1
The two-cap solve, worked step by step
$100,000 income, $500/mo other debts, $40,000 down, 6.5% rate.
Max home price
$320,673
Binding constraint
front
PMI
$140/mo
Front-end cap and back-end cap both computed; the tighter one (front) sets $320,673 as the answer — not a flat income multiple.
What affects the result
Which of the two caps is tighter
The entire affordability answer hinges on comparing front-end and back-end caps directly, not applying a single formula.
Escrow scaling with price
Property tax and PMI both grow with the price being solved for, which is why the calculation must be solved iteratively rather than looked up.
More questions answered
Why don't lenders just use one ratio instead of two?
Because housing cost alone doesn't capture true repayment risk — a borrower with no other debt can safely carry a higher housing payment than one with significant existing obligations. The two-ratio system (front-end and back-end) captures both housing affordability and overall debt burden.
Model assumptions & disclosures
Not a pre-approval. This calculator estimates your maximum home price using standard debt-to-income (DTI) caps against the income, debts, rate, and down payment you enter. It does not verify income, assets, credit, or employment, and it is not an offer or commitment from any lender. Actual mortgage pre-approval requires full lender verification and may differ from this estimate.
DTI caps are lender-dependent. The 28/36 (conventional) and 31/43 (FHA) caps used as defaults are common industry guidelines, not universal rules. Individual lenders, loan programs, and automated underwriting systems can approve — or require — different ratios based on credit score, cash reserves, loan-to-value, and other compensating factors not modeled here.
Rate, tax, insurance, and PMI are your estimates, not live data. This calculator never fetches a current mortgage rate, your actual local property tax rate, or a real insurance quote. Defaults are reasonable national approximations — enter your own numbers, or figures a lender or insurer has actually quoted you, for an accurate result.
Credit score is not modeled. Your interest rate — which directly drives your monthly payment and therefore your DTI — depends on your credit score and the specific loan program. This calculator assumes whatever rate you enter; it does not estimate what rate you would actually qualify for.
Not financial or legal advice. This calculator provides illustrative estimates based on your inputs. It does not account for your complete financial picture, local market conditions, or individual circumstances. Consult a qualified mortgage lender, financial advisor, or housing counselor before making a home-purchase decision.