📖 Overview
Use this tool to estimate an affordability ceiling before shopping for homes.
🧪 Example Scenarios
Use these default and higher-pressure example inputs to explore how sensitive this calculator is before using your real numbers.
| Input | Base Case | Higher Pressure Case |
|---|---|---|
| Gross Monthly Income ($) | 9,000 | 8,100 |
| Max Housing Ratio (%) | 28 | 33.6 |
| Monthly Debt Payments ($) | 900 | 1,035 |
| Annual Interest Rate (%) | 6.25 | 7.5 |
| Loan Term (years) | 30 | 34.5 |
⚙️ How It Works
This estimates maximum affordable loan size from income, debt obligations, target housing ratio, and financing assumptions.
The Formula
Max Payment = (Gross Income × Housing Ratio) − Existing Debt | Loan = Max Payment ÷ Monthly Rate Factor
| Housing Ratio | Target PITI-to-income ratio (e.g. 28%) |
| Existing Debt | Current monthly debt obligations reducing available room |
| Rate Factor | Amortization factor based on rate and term |
💡This calculator is scenario-based. Better input quality leads to better decision quality.
⚠️Maximum affordability is not the same as comfortable affordability. Borrowing at the ceiling of what lenders approve can leave no room for savings, emergencies, or lifestyle costs.
Quick Reference
| Gross Income | At 28% ratio | At 32% ratio | At 36% ratio |
|---|---|---|---|
| $5,000/mo | ~$220k loan | ~$260k loan | ~$295k loan |
| $7,500/mo | ~$335k loan | ~$390k loan | ~$445k loan |
| $10,000/mo | ~$445k loan | ~$520k loan | ~$590k loan |
| $15,000/mo | ~$670k loan | ~$780k loan | ~$890k loan |
When To Use This
- Use this tool when you need a fast decision during active planning or execution.
- Use this before committing money, time, or tradeoffs that are hard to reverse.
- Use this to compare options using the same assumptions across scenarios.
Edge Cases To Watch
- Results can be misleading if key inputs are missing, stale, or unrealistic.
- Very small or very large values may amplify rounding effects and interpretation risk.
- If assumptions change mid-decision, recalculate before acting.
Practical Tips
💡 Use conservative income assumptions.
💡 Run multiple rate scenarios to test rate sensitivity.
💡 Run a best-case, base-case, and worst-case scenario before deciding.
💡 Use recent real values, not ideal assumptions, for better accuracy.
Frequently Asked Questions
❓ Does this include down payment?
No, this estimates affordable loan amount from payment capacity.
❓ Why can debt reduce affordability sharply?
Existing obligations directly reduce available housing payment room.