Affordability Calculator

Understanding Mortgage Affordability

Determining how much house you can afford is a crucial first step in the home buying process. Different financial experts and institutions have varying guidelines for what constitutes an "affordable" home purchase.

Common Affordability Rules

The 28/36 Rule

This traditional rule states that:

• Your monthly mortgage payment should not exceed 28% of your gross monthly income
• Your total monthly debt payments should not exceed 36% of your gross monthly income

Dave Ramsey's Conservative Approach

Financial expert Dave Ramsey recommends:

• Choose a 15-year fixed-rate conventional mortgage
• Monthly payment should not exceed 25% of your take-home pay
• Make a down payment of at least 20%

The 3x Rule

A simple rule of thumb suggests that you can afford a home that costs:

• Up to 3 times your annual gross income
• This is a basic starting point but doesn't account for other financial factors

Additional Affordability Factors

Beyond these rules, consider these important factors when determining how much house you can afford:

• Property taxes and insurance costs
• Home maintenance and repairs (typically 1-2% of home value annually)
• Utility costs and HOA fees
• Emergency savings buffer
• Future life changes and financial goals

Remember that just because you can qualify for a certain mortgage amount doesn't mean you should borrow that much. Consider your comfort level with the monthly payment and ensure you have room in your budget for other financial goals and unexpected expenses.