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By Mayra Paris
Updated: March 26, 2021 11:24 AM ET | Originally published: March 5, 2021

It’s true — rates hit 14 record lows in 2020. But with this have come more stringent vetting measures, with banks demanding higher down payments and better credit.

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1Add Your Info
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Gross income is the amount you receive before taxes and other deductions.

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In order to get the most accurate estimate, select the credit score that best represents your credit history.

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Not sure which loan type to choose? Go with a 30 Year Fixed Rate Loan, 90%+ of Americans do.

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If your cash down payment is less than 20% of your loan amount, we will automatically apply PMI to your results.

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In order to get the most accurate estimate, select the credit score that best represents your credit history.

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Not sure which loan type to choose? Go with a 30 Year Fixed Rate Loan, 90%+ of Americans do.

Money’s calculator results are for illustrative purposes only and not guaranteed. Money uses regional averages, so your mortgage payment may vary.

2See Your Results
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We try to keep our information current and accurate. However, interest rates are subject to market fluctuations and vary based on your qualifications. Calculator results assume a good credit score and factor-in regional averages; your actual interest rate may differ. Calculator results are for educational and informational purposes only and are not guaranteed. You should consult a licensed financial professional before making any personal financial decisions.

You can afford a house worth:

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with monthly payment of

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Monthly Breakdown

Mortgage Payment
Private Mortgage Insurance
Property Tax
Home Insurance
HOA / Condo Fees
3What is Today's Rate?

Rate for yesterday Apr 09 was

3.529%

Find your actual rate at Quicken Loans today!

View Your Rate For April 10, 2021

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If you’re worried about your application getting denied, our mortgage affordability calculator can help you figure out how much house you can actually afford to buy.

How Our Home Affordability Calculator Works

Our home calculator can help you determine how much you can comfortably spend on a new mortgage while still being able to meet your existing obligations.

Our calculator works in one of two ways: either with your debt-to-income ratio, or your proposed budget. For the first method, this the info we’ll need you to input:

Gross Monthly Income

First, you need to calculate your monthly income and that of your partner or co-buyer, if you have one. Include any sources of cash you may use to pay your mortgage, like salary, alimony, and any other income. This should be your gross income, meaning whatever you make before taxes are taken out.

Monthly Debts

This should only include the debt that would appear on your credit report:

  • credit card payments
  • car payments
  • student loans, etc.

Don’t include things like subscriptions, groceries, memberships, insurance premiums, and utility bills, which don’t count towards your debt-to-income (DTI) ratio.

Banks use this ratio to gauge your ability to pay your mortgage and help determine whether lending you money is a wise investment for them. Ideally, it should be kept below 36%.

To calculate your DTI, divide your total monthly debt payments by your total monthly income and turn the result into a percentage.

Here’s an example: if you make $5,000 a month and you pay $1,800 in debts, your DTI is 36% (1800 / 5000 = 0.36).

Down Payment

Most mortgage loans require at least a 3% down payment of the total loan amount. Of course, if you can offer a higher down payment, your monthly payments will go down and become more affordable.

State

Many lenders offer marginally different rates depending on your state.

Credit Rating

As with any other big purchase, the better your credit score, the lower your interest rate.

Loan Type

This encompasses the loan term, loan type, and interest rate type. Rates can differ radically depending on all three factors, so we included the most common offerings.

The second way we can calculate your home affordability is according to your budget, or total mortgage costs. This requires you to input your:

  • Desired Monthly Payment amount
  • Down Payment
  • State
  • Credit Rating
  • Loan Type

Home Affordability Calculator Results

Once you’ve input all the information according to the method you chose, our calculator will let you know the top amount you can pay for a house, as well as what your monthly payment would be.

We even break down that payment into each component part — if you tell us in which state you will purchase, we’ll also provide state averages for state property taxes, and your homeowners insurance premium.

Factors that Affect your Home Affordability

The 28/36 Rule

Lenders may determine your ability to afford new debt by using the 28/36 Rule. Breaking it down, this rule of thumb establishes that:

  • Housing expenses should be no more than 28% of your total pre-tax income. This includes your monthly principal and interest, property taxes, and insurance payments.
  • Total debt should not exceed 36% of your total pre-tax income. This includes the housing expenses mentioned above, and additional debt — such as credit cards, car loans, personal loans, and student loans — so long as these monthly payments are expected to continue for 10 months or more.

In concrete numbers, the 28/36 rule means that someone who makes $5,000 a month should not spend more than $1,400 on housing costs every month.

If you’re a renter, that’s the most you should spend on your lease to maintain good financial health. For a homeowner, however, that $1,400 should cover your monthly mortgage payment, as well as homeowners’ insurance premiums and property taxes.

VA and FHA Loans

The type of mortgage you’re requesting will also help determine a lender’s flexibility in evaluating your loan application.

FHA Loans, insured by the Federal Housing Administration, have maximum qualifying ratios of 31/43 for most applicants with a credit score higher than 500 — 31% for housing costs and 43% for total debt. If your credit score is over 580 and you meet other requirements, you may be allowed to have ratios as high as 40/50.

VA Loans are even more lenient. While the maximum DTI ratio is set at 41% in the general guidelines, the VA insures loans for people with higher ratios provided they meet other compensating factors.

4 Steps to the Best Interest Rate

Improve Your Credit Score

Your credit score is a three-digit summary of your creditworthiness. A very high credit score usually means a low interest rate, while a low score will get you a very high rate. One way to improve your score is to pay your bills on time every month. Another is to reduce your debt — which will also lower your DTI ratio.

Shop Around

Banks and lenders price risk differently and offer interest rates based on each applicant’s creditworthiness. To compare offers more accurately, you should request rate quotes from multiple lenders (including credit unions and online banks), preferably on the same day.

Increase Your Down Payment

Most applicants will need to put at least 20% down on their mortgage if they want to avoid paying for private mortgage insurance. While there are options if you don’t have that much money upfront, increasing your down payment could reduce your interest rate, monthly payment, and DTI ratio considerably.

Lock In Your Rate

Locking in your rate with your lender of choice guarantees that the quoted interest rate won’t go up before you close on the mortgage. This gives you between 30-60 days to close on the loan with the interest rate you’ve locked in. Before locking your rate, consider that the market is currently bustling and lenders may take longer to close on loans.

Home Affordability Calculator FAQs

How much house can I afford based on my income?

Figuring out whether you can afford a house is pretty simple. The easiest way is to enter your information into our calculator. You’ll need to know your gross monthly income as well as your monthly debt, including credit cards and loan payments. We also ask for the down payment amount you can afford and the type of mortgage you are interested in obtaining. Entering this data into our widget calculates your debt-to-income ratio and suggests an affordable monthly mortgage payment. Based on this, the formula also calculates a home value so you can narrow your search.

How much house can I afford in my state?

The home value you can afford depends not only on your own financial state but also on where you live or plan to live. State property taxes are paid annually or biannually, depending on the state. Calculating how much property tax you can afford to pay every year and integrating that into your budget will help you determine how much home you can afford in your state. Other factors that determine how much you can afford are interest rates and closing costs, both of which vary by location.

Should I wait to buy a home?

It’s always hard to time the market, but it’s been especially difficult this year. The coronavirus pandemic and the resulting economic downturn have shaken up the real estate market. Even though mortgage rates are very low right now, there is no way to know whether they will fall even lower or start to move back up. However, the fact remains that interest rates are lower right now than they have ever been. If you are in a good financial position to purchase a home at the moment— meaning you have enough cash for a down payment, a good or great credit score, stable employment, and a low debt-to-income ratio — it may make sense for you to take that step now rather than later.