Home Affordability Calculator Based on Income and Debts

How to use it

1. Gross annual income for everyone on the loan, before taxes.
2. Other monthly debt payments: car, student loan, minimum credit card payments and similar.
3. Cash you can put toward the purchase. The calculator sets aside the closing cost percentage you choose and uses the rest as the down payment.
4. Rate and term. Use a quote if you have one.
5. DTI limit. Pick the ratio to test. The choices are Fannie Mae's published thresholds and 43%, a common reference point.

How it works

Your monthly housing budget is:

Housing budget = gross monthly income × DTI limit − other monthly debts

The calculator then searches for the highest price whose full payment (principal and interest, property tax, insurance, HOA dues, and PMI when the down payment is under 20%) fits that budget. Because the down payment, PMI and taxes all change with the price, it solves the problem by narrowing in on the answer rather than with a single formula.

What lenders look at

The CFPB defines DTI as all monthly debt payments divided by gross monthly income, and notes that different loan products and lenders have different limits. Fannie Mae's Selling Guide sets a 36% maximum for manually underwritten loans, which can rise to 45% if the borrower meets credit score and reserve requirements, and allows up to 50% for loans underwritten through its Desktop Underwriter system. Freddie Mac's homebuyer site says that ideally your DTI should be below 45%.

DTI is not the only test. Lenders also look at your credit history, savings left after closing (reserves), the stability of your income and the appraisal.

Choosing a comfortable number

A lender's maximum is the most you could borrow, not necessarily what is comfortable. Things a DTI ratio leaves out include:

• Your take-home pay. DTI uses gross income; taxes, retirement savings and health premiums come out first.
• Childcare, commuting and other costs that are not debts.
• Upkeep and repairs, which landlords used to cover.
• An emergency fund, separate from the down payment.

Try the calculator at 36% and at a lower limit, and compare the payment with your actual monthly budget.

Limits

This is an estimate for a conventional loan. FHA and VA loans have their own DTI rules and mortgage insurance; use the payment calculator to price a specific loan. Closing costs are set aside as a percentage of price; Freddie Mac says they typically run 2% to 5%. It is educational, not a pre-approval or advice.

Common questions

What income should I use?

Gross income: what you earn before taxes and deductions, the way the CFPB defines it for DTI. For a joint application, add both incomes and both sets of debts.

What counts as monthly debt?

Minimum payments on car loans, student loans, credit cards, personal loans, child support and similar obligations. Utilities, phone bills and groceries are not counted.

Is 43% a legal limit?

Not for most loans today. The CFPB's General Qualified Mortgage definition used to cap DTI at 43%; a final rule issued in 2020 removed that cap and replaced it with price-based thresholds. Lenders and loan programs set their own DTI maximums.