Affordability
liveUnderstanding affordability
The Home Affordability Calculator is built around the same formulas your lender uses. Below is the math, in plain language, so you understand exactly what the numbers mean.
The core mortgage formula
Every amortizing mortgage payment follows the same equation: M = P × [r(1+r)n] / [(1+r)n − 1], where P is the principal loan amount, r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments. This formula produces a level payment that pays off the loan exactly over its term — front-loaded with interest, back-loaded with principal.
Why amortization matters
In the first year of a 30-year mortgage at 6.875%, roughly 86% of each payment goes to interest. By year 20, that flips — most of your payment is now retiring principal. Understanding this curve is the key to making smart decisions about extra payments, refinancing, and how long to stay in a home.
What this calculator includes
Lenders use the 28/36 rule: your housing payment should not exceed 28% of gross monthly income, and total debts should stay under 36%. We compute both limits and show your realistic maximum. Every input updates the result in real time — no submit button, no page reload, no data sent anywhere.
Affordability questions
What is the 28/36 rule?
The 28/36 rule is a guideline lenders use: your total monthly housing payment (PITI) should not exceed 28% of your gross monthly income, and your total monthly debt payments (including the mortgage) should not exceed 36%.
How much income do I need for a $400,000 house?
Following the 28% rule with a 20% down payment, 6.875% rate, and typical taxes and insurance, you'd need roughly $110,000–$130,000 in annual household income. Use the calculator above for an exact figure.
Does this calculator account for property taxes and insurance?
Yes. You enter annual property tax and insurance rates as percentages of home value. The calculator factors them into your monthly payment and applies the 28/36 affordability test.