Phase 2 · Wealth & Leverage
Home Affordability Calculator
Not what the bank will approve — what you can actually live with. Work backward from your income through the 28/36 rule, taxes and insurance included, to an honest maximum price.
How much house can I afford on my salary?
The 28/36 rule sets the ceiling: housing costs stay under 28% of gross monthly income, and all debt payments together under 36%. Whichever binds first is your maximum payment. Then work backwards through the loan formula — including taxes and insurance, which come out of that same payment.
- Max payment = min(28% × income ÷ 12, 36% × income ÷ 12 − other debts). Existing debt reduces your house budget dollar for dollar.
- Worked example (defaults on this page): $90,000 income with $500/mo of other debt gives a $2,100 ceiling — the 36% back-end test binds, not the 28% one.
- With $40,000 down at 7% over 30 years and 1.5% for tax and insurance, that supports a home price of about $299,394 and a $259,394 loan.
- This is the bank’s limit, not a budget. It counts no retirement saving, childcare, maintenance or repairs — buying at the maximum is how people become house-poor while technically qualifying.
Under the hood
The math, fully exposed
We take the tighter of the two 28/36 limits, then solve the price that fits — taxes and all:
Max payment = min(28% × income⁄12, 36% × income⁄12 − other debts)
Payment factor k = r(1+r)n ⁄ ((1+r)n−1) (r = rate⁄12, n = months)
Max price = (max payment + down × k) ⁄ (k + tax&ins ⁄ 12)
Loan = max price − down payment
- Two ceilings, take the lower: the 28% housing cap or the 36% total-debt cap — whichever binds first sets your budget.
- Taxes ride inside the 28%: property tax and insurance share the payment with principal and interest, so a high-tax area buys less house.
- Comfort, not approval: lenders allow far more; this targets a payment that still leaves room to live and save.
Your directives
What to do next, based on your numbers
Adjust the sliders to generate tailored recommendations.
Answers
Frequently asked questions
How much house can I afford on my income?
The classic guide is the 28/36 rule: keep your total housing payment (principal, interest, taxes and insurance) under 28% of gross monthly income, and all debt payments combined under 36%. This calculator applies both limits, takes the lower one, then works backward through the mortgage math — including property tax and insurance — to the maximum home price those limits support.
Why is this lower than what my lender approved?
Lenders often approve up to 43–50% debt-to-income, which is what you can borrow, not what you should. Borrowing the maximum leaves you "house poor" — little room for savings, emergencies or life. The 28/36 rule targets a payment you can live with comfortably, which is why the number here is usually well below the bank's ceiling. The approval is the cap; this is the comfort zone.
How do taxes, insurance and PMI change the answer?
A lot. Your real housing payment is PITI — principal, interest, taxes and insurance — not just the loan payment. Property tax and insurance can add hundreds a month, and that money is part of the 28% limit, so it directly lowers the price you can afford. If your down payment is under 20%, private mortgage insurance (PMI) is added on top, reducing affordability further — favor 20% down to avoid it.
Is a bigger down payment always better?
It raises the price you can afford and, at 20%, removes PMI — but do not drain your emergency fund to get there. A home you cannot maintain or that leaves you with no cash buffer is riskier than a slightly smaller one. Balance the down payment against keeping three to six months of expenses liquid. This is an educational model, not financial advice — confirm with a lender.