Reference formulas and worked examples below keep their stated units. Monetary examples use USD; dimensional examples use US customary units unless labeled otherwise. Metric calculator inputs are converted to these reference units before calculation. Choosing another currency does not convert example amounts or exchange money.
How to use this mortgage affordability calculator
Choose your own housing and total-debt limits. The stricter limit sets the housing budget; entered tax, insurance, HOA and mortgage insurance leave the amount available for principal and interest.
How the calculation works
Gross monthly income = annual gross income ÷ 12. Housing-ratio budget = monthly income × chosen housing ratio. Total-debt budget for housing = monthly income × chosen total-debt ratio − other monthly debt.
Use the smaller housing budget. Subtract annual tax ÷ 12, annual insurance ÷ 12, monthly HOA, and monthly mortgage insurance. Tax and insurance monthly estimates are rounded to cents; the remaining loan-payment allowance is rounded down to cents.
Find the largest starting loan balance repayable within the entered term at or below that monthly principal-and-interest allowance. The reverse calculation uses monthly interest rounded to cents, so the final payment also stays within the allowance.
Home-price budget = maximum loan balance + entered cash down payment. If the ownership costs already exceed the entered ratio budget, no home-price result can satisfy this scenario. The budget table shows the shortfall.
Worked example
With 120,000 gross annual income, monthly income is 10,000. A 30% housing limit allows 3,000. A 40% total-debt limit minus 1,000 of other debts also allows 3,000. After 500 of monthly taxes and insurance, 2,500 remains for the loan. At 0% over 120 months, that supports 300,000 borrowed; adding 50,000 cash down gives a 350,000 home-price scenario.
Limits and assumptions
Fixed nominal annual interest divided by 12, with monthly end-of-period payments and cent rounding. This does not calculate APR, daily interest, variable rates, or Canadian semiannual mortgage compounding. A currency choice does not change lending rules. Ratios are user assumptions, not universal approval standards. It does not assess credit, stress tests, mortgage program rules, income stability, living expenses, closing costs, savings reserves, or maintenance. Property tax, insurance and PMI are entered amounts, not local-rule calculations; revise them if the property or down-payment scenario changes.
Frequently asked questions
Does this tell me what a lender will approve?
No. It checks the ratios and assumptions you enter. Lenders can use different limits, qualifying rates, income definitions, fees, insurance and other requirements.
Why are there two debt ratios?
One caps housing alone as a share of gross income. The other caps housing plus other debts. The smaller remaining housing allowance controls this scenario.
Can I choose different limits?
Yes. Both percentages are editable, including values below the examples. This tool does not recommend a universal threshold.
Why are taxes and insurance not calculated from the house price?
They depend on the property, location and policy. Use an informed estimate, then revisit it when considering a specific property.
What if no loan payment fits?
If entered ownership costs already exceed the ratio allowance, the main result says no feasible budget. If they exactly use the allowance, only the cash down payment is available for the price under this model.
References
CFPB: debt-to-income ratio and differing lender limits
CFPB: principal and interest versus total monthly housing payment