Clearing the $500 car payment does not raise this number
The default scenario runs $100,000 of gross household income against $500 of monthly debt. Twenty-eight percent of the resulting $8,333 monthly income is $2,333. Thirty-six percent is $3,000, and taking the $500 of debt out of that leaves $2,500. The tool keeps the lower of the two, so $2,333 is the housing budget and the front-end rule is the one doing the work.
Max housing = min(28% income, 36% income - debts) | Home price derived from max P&I + tax
That has a consequence buyers rarely expect. Because the back-end limit sits $167 above the front-end limit here, the $500 of car and card payments is invisible to the answer. Pay it off entirely and the maximum home price stays at $338,615, to the dollar. The debt field does nothing at all until it grows large enough to pull the 36% limit below the 28% one.
The crossover sits at exactly 8% of gross monthly income, which is the gap between 36% and 28%. On $8,333 a month that is $667. Below $667 of monthly debt the result is fixed; above it, every additional dollar of obligation comes straight out of the housing budget. At a 7% rate with 1.2% property tax, one dollar of monthly housing budget is worth about $124 of home price, since $1 divided by the combined payment-plus-overhead factor of 0.00807 gives $123.92.
Below $667 a month of debt on this income, paying debt down moves the maximum home price by nothing.
Above $667, each extra $1 of monthly debt removes roughly $124 of maximum home price at these rate and tax settings.
The crossover is always 8% of gross monthly pay, so it rises with income: double the income and it becomes $1,333.
Read the breakdown row labelled binding constraint before deciding what to fix, because it names which of the two limits is actually holding you back.
Each extra dollar of down payment buys 82 cents of house
Raise the down payment from $60,000 to $70,000 and the ceiling moves from $338,615 to $346,859. That is $8,244 more house for $10,000 more cash, not $10,000 more house. The ratio is fixed by the arithmetic at 0.8244: the monthly mortgage factor of 0.006653 divided by that same factor plus the 0.001417 monthly overhead the model reserves for taxes and insurance.
The reason is that a more expensive home carries more property tax and more insurance, and both are paid out of the same $2,333 housing budget before any principal or interest. So the loan does not stay put, it shrinks: $278,615 at $60,000 down, $276,859 at $70,000 down. You added $10,000 of cash, bought $8,244 more house, and borrowed $1,756 less.
This runs against the common intuition that a larger down payment is pure leverage on price. It still helps, and it remains the one input you control directly without needing a raise or a friendlier rate. But while the housing budget rather than the cash is the binding constraint, the return on each extra dollar saved is roughly 82 cents of purchase price, and the rest of it simply retires debt you were never going to be allowed to carry.
The $480 of the budget that never reaches the mortgage
The headline monthly figure is $1,854, but the housing budget behind it is $2,333. The roughly $480 difference is property tax and homeowners insurance, and the model subtracts it before it solves for a loan at all. At the default 1.2% tax rate plus the built-in 0.5% insurance allowance, a $338,615 home carries $5,756 a year of the two combined, or $479.70 a month.
That is 20.6% of the entire housing budget gone before a dollar of principal or interest. It is also why a payment a lender quotes you as principal and interest alone is not comparable to the figure on this page: escrow is already inside this one, and adding it later will break a budget built the other way round.
The 0.5% insurance figure is an assumption welded into the model rather than a field you can edit. On the default answer it works out at $1,693 a year, or $141 a month, and a coastal or wildfire-exposed property can sit well above that. The property tax rate is editable and it moves the result hard: taking it from 1.2% to 2.2% on the same income, debts and down payment drops the ceiling from $338,615 to $306,920, a loss of $31,695 of buying power for a single percentage point of local tax.
The default answer lands at 17.7% down, just under the PMI line
Look at what the default inputs actually produce. Sixty thousand dollars of cash against a $338,615 home is 17.7% down, which sits below the 20% mark at which private mortgage insurance normally stops applying on a conventional loan. The real monthly cost of that house would therefore be higher than the $1,854 shown, because PMI is not modelled here at all.
Closing the gap takes more than the obvious arithmetic. Twenty percent of $338,615 is $67,723, but adding that extra cash also lifts the price the budget supports, which lifts the 20% target with it. The figure that actually settles is around $69,250 of down payment against a home of roughly $346,240, which is where cash and price stop chasing each other.
So whenever your down payment divided by the maximum price comes out under 20%, treat the monthly payment on this page as optimistic in one specific way and ask a lender what PMI would add. The alternative is to aim at a house priced below the ceiling, where the same cash clears the threshold and the insurance premium disappears from the equation.
One point of mortgage rate costs about $21,800 of house
Hold income, debts, down payment and tax rate at their defaults and change nothing but the rate. At 7% the ceiling is $338,615. At 8% it is $316,826, which is $21,789 less, a 6.4% cut in buying power for one percentage point. Move the other way and 6% lifts the ceiling to $363,330, a gain of $24,715.
The asymmetry is worth noticing: a point down is worth more than a point up costs, because the payment factor curves rather than moving in a straight line. It also means an affordability figure is only as current as the rate you typed into it. A number worked out a few months ago against a different market rate is not a price bracket you can still shop in today.
The rate field assumes a 30-year fixed loan amortised over 360 payments, which is the only loan shape this model knows. A 15-year term, an adjustable-rate loan, a temporary buydown, or discount points paid at closing all change the payment factor, and none of them are represented in the result. If you are comparing those structures, price the payment separately and come back with the rate that actually applies.
The 28% is measured against gross pay you never actually receive
The income field wants gross, pre-tax household income, because gross is the base lenders use when they compute debt-to-income ratios. The $2,333 housing budget is 28% of $8,333 of gross monthly income, and the model never sees a payroll deduction, a retirement contribution or a tax withholding along the way.
Your take-home pay is smaller than $8,333, so $2,333 is a larger share of the money that actually reaches your account than the 28% label suggests. This is the main reason a payment that clears every lender test can still feel tight month to month, and why plenty of buyers who qualify at the ceiling deliberately shop below it.
Enter combined household gross income when two incomes will be on the loan, and enter the debts that appear on a credit report: car payments, student loans and minimum credit card payments. Groceries, childcare, utilities, commuting and saving do not belong in that field, because a debt-to-income ratio does not count them. That omission is the whole point of the ratio, and the whole reason it is a lending test rather than a household budget.
A lender ceiling is not a shopping target
Every figure on this page describes the most a conventional lender might permit under the 28/36 guideline. Nothing in it argues that borrowing $278,615 is a good idea, only that the ratios allow it. The distinction matters because the ceiling rises automatically with a raise or a dip in rates, while your appetite for a fixed obligation lasting 360 months probably does not move at the same speed.
The ceiling also leaves no room for the costs that separate owning from renting. Maintenance is the one owners routinely underestimate, and closing costs typically run a few percent of the purchase price on top of the down payment, which means the cash in the down payment field is not the cash you need at the table.
The practical move is to use the ceiling as an outer boundary for the search, pick a target under it, and take a pre-approval to a lender so you are negotiating against an underwritten number instead of an estimate. Which rule binds tells you where pressure will pay: when the 28% front-end line is the constraint, only income, rate, property tax rate or cash will shift it, and paying off debt will not.
Where this ceiling stops being your real borrowing limit
The model describes exactly one loan shape: a 30-year fixed mortgage, the 28/36 ratio pair, an editable property tax rate and a fixed 0.5% insurance allowance. Everything outside that shape is missing, and some of the omissions run in your favour rather than against you.
Government-backed programmes are the clearest case. FHA and VA loans frequently allow debt-to-income ratios above 36%, so a borrower who qualifies for one of them may be able to buy more than this page shows. They carry their own rules and costs in exchange, including the mortgage insurance premiums on FHA loans, which this calculator does not price either.
Treat the output as a planning estimate rather than a loan offer, a pre-approval, or financial advice. It exists to put you in the right price bracket before you start looking at listings. The number that actually governs what you can buy comes from an underwritten pre-approval against your own credit file, your own local tax bill and a real insurance quote.
No PMI: below 20% down, the true monthly cost is higher than the principal and interest shown.
No HOA or condo dues, which can add hundreds of dollars a month to the housing cost this budget has to cover.
No closing costs, moving costs, or maintenance reserve.
One flat 0.5% insurance allowance, regardless of location, age of the home, or claims history.
No credit score, employment history, cash reserves, or lender overlays, all of which can move the real limit in either direction.
No higher-ratio programmes such as FHA and VA, and no adjustable-rate, 15-year, or bought-down loan structures.
Frequently Asked Questions
What is the 28/36 rule?
Housing costs should stay below 28% of gross monthly income (the front-end ratio), and total debt payments below 36% (the back-end ratio). The tighter of the two constraints determines your limit. If you carry little other debt, the 28% housing rule usually applies; if you carry sizable car or student loan payments, the 36% rule can become the binding one.
How does my down payment change what I can afford?
A larger down payment raises the home price you can reach in two ways: it adds directly to the price on top of the loan, and it shrinks the loan your monthly budget has to cover. Putting down at least 20% also lets you avoid private mortgage insurance, freeing up part of your housing budget for principal and interest.
Why is the monthly payment lower than my housing budget?
The housing budget has to cover property taxes and homeowners insurance, not just the mortgage. This calculator sets aside an estimate for those first, so the principal-and-interest payment it shows is smaller than the full housing budget. The leftover is what actually services the loan.
Should I borrow the maximum amount?
Usually not. The figure here is a ceiling under typical lending rules, not a target. Borrowing the maximum leaves little margin for maintenance, emergencies, or rate changes on adjustable loans. Aiming somewhat below the maximum keeps room in your budget for saving and the unexpected costs of ownership.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Results are estimates based on the figures you enter and standard formulas. Rates, fees, taxes, and lender terms vary and change over time, so confirm important numbers with your lender or a qualified professional. This is educational information, not financial advice.