David is a Chartered Financial Analyst with over 15 years of experience in mortgage lending and personal finance, specializing in home affordability and DTI-based underwriting.
This 4-in-1 Home Affordability calculator helps you find how much house you can afford based on your DTI ratio. Enter any three variables—Income, Debt, DTI Ratio, or Affordable Payment—and we will solve for the fourth.
Home Affordability Calculator
Home Affordability Formulas (DTI)
M = (I * R) – D
Solve for Gross Income (I):
I = (M + D) / R
Solve for Monthly Debt (D):
D = (I * R) – M
Solve for DTI Ratio (R):
R = (M + D) / I
Formula Variables
- (I) Gross Monthly Income: Your total income before any taxes or deductions are taken out.
- (D) Total Monthly Debt: Your existing minimum monthly debt payments (e.g., car loans, student loans, credit card minimums). *Do not* include your current rent.
- (R) DTI Ratio: Your “Debt-to-Income” ratio. This is the percentage of your gross income that lenders will allow to be spent on total debts, including your new mortgage.
- (M) Affordable Monthly Payment: The estimated monthly housing payment (Principal, Interest, Taxes, and Insurance – PITI) that you could afford based on the other three variables.
Related Calculators
- Mortgage Payment Calculator
- Debt to Income (DTI) Calculator
- Loan Repayment Calculator
- Conventional Loan Calculator
What is a Home Affordability Calculator?
A Home Affordability Calculator is a tool that helps you estimate the maximum monthly mortgage payment you can comfortably afford based on your income, existing debts, and a target Debt-to-Income (DTI) ratio. Lenders use the DTI ratio as a primary measure to determine if you have the financial capacity to take on a new mortgage.
Your DTI is the percentage of your gross monthly income that goes toward paying your monthly debt obligations. Lenders look at two types: the “front-end” (housing payment only) and “back-end” (all debts, including housing). This calculator focuses on the “back-end” DTI, which is the one most lenders use to qualify you for a loan.
By entering your income, debts, and a target DTI (a conventional loan often requires 43% or less), the calculator can solve for the “Affordable Monthly Payment.” You can then take this payment amount to our Mortgage Payment Calculator to see what total loan amount it corresponds to.
How to Calculate Home Affordability (Example)
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Find Your Inputs
Let’s say you have a Gross Monthly Income (I) of $8,000. Your existing debts (car loan, student loan) total (D) $1,000 per month. Your lender wants a maximum DTI Ratio (R) of 43%. You want to find your Affordable Monthly Payment (M).
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Convert DTI Ratio to Decimal
First, convert the DTI percentage to a decimal: R = 43% / 100 = 0.43
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Calculate Total Allowable Debt
Multiply your income by your DTI ratio to find the maximum total monthly debt your lender will allow: Total Allowable Debt = I * R = $8,000 * 0.43 = $3,440
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Solve for Affordable Payment (M)
Subtract your existing debts from your total allowable debt to find the remaining amount for your mortgage:
M = (Total Allowable Debt) – D
M = $3,440 – $1,000
M = $2,440 -
Final Result
Based on these numbers, you can afford a total monthly housing payment (PITI) of $2,440.
Frequently Asked Questions (FAQ)
Most lenders look for a DTI ratio of 43% or lower for conventional loans. Some government-backed loans like FHA may allow up to 50%. The lower your DTI, the less risky you appear to lenders and the more likely you are to be approved.
Does “Affordable Payment” include taxes and insurance?Yes. The (M) value calculated here represents your total *PITI* (Principal, Interest, Taxes, and Insurance). When you use this number in a mortgage calculator, remember that only part of it will go toward the loan (Principal & Interest).
How much income do I need to afford a certain payment?You can use this calculator to find out. Enter your Monthly Debt (D), your desired Monthly Payment (M), and a Target DTI Ratio (R) (e.g., 43%). The calculator will solve for the Gross Monthly Income (I) you would need to qualify.
How can I improve my affordability?You have two main levers: either increase your income (I) or decrease your monthly debts (D). Paying off a car loan or credit card balance before applying for a mortgage can significantly lower your DTI and increase the payment (M) you can afford.