Mortgage Affordability Calculator
Find the maximum home price your income supports using the 28/36 rule (or FHA 31/43 / aggressive AUS presets), with the current 6.55% rate (Freddie Mac PMMS, week of 2026-07-16) and a full PITI breakdown — principal, interest, tax, insurance, and PMI if it applies.
$383,223 maximum home price
At 6.55% over 30 years with a $40,000 down payment (10.4% of price), your monthly PITI comes to $2,800: $2,180.70 principal & interest, $351.29 property tax, $125.00 insurance, $143.01 PMI.
Front-end (housing) cap: $2,800/mo at 28%. Back-end (total debt) cap: $3,100/mo at 36% minus your $500 in debts. The front-end (housing) ratio is what limits your price — it produces the lower of the two caps.
Because your down payment is under 20%, PMI of $143.01/mo is included until you reach 78-80% LTV.
Rate default 6.55% — Freddie Mac PMMS, week of 2026-07-16 (30-yr fixed average, as of 2026-07-16); this changes weekly, so update the field with the current PMMS rate for a precise result. Property tax national average 1.1% (Tax Foundation) — real rates run 0.28%-2.42% by state (Hawaii to New Jersey); check your exact state on our property tax calculator. PMI 0.3%-1.5%/yr depending on credit score and LTV depending on credit score and LTV. DTI presets are lender guidelines, not universal legal limits — actual approval varies by lender and automated underwriting. Educational estimate, not a loan offer or pre-approval. How we calculate →
The 28/36 rule (and why it's a guideline, not a law)
The classic affordability rule caps your housing payment at 28% of gross monthly income (front-end ratio) and your total debt payments — housing plus cards, auto loans, student loans — at 36% (back-end ratio). Neither is a legal limit; they're industry conventions used as a sanity check by lenders and buyers alike. Worked example: a $120,000/year income with no other debts caps the housing payment at $2,800/month under the 28% rule — which is what actually binds here, since the 36% back-end cap (3,600) is higher and non-binding with zero other debt.
FHA, conventional-with-AUS, and the "aggressive" preset
FHA loans use 31%/43% (front/back) as the standard ratio, per HUD guidance. Conventional loans run through an Automated Underwriting System (Fannie Mae's Desktop Underwriter, Freddie Mac Loan Product Advisor) can extend the back-end ratio well past 36% with strong compensating factors — credit score, cash reserves, stable income history — up to roughly 45% back-end in an AUS-approved scenario, which we model as the "aggressive" preset. Beyond that, some lenders cite even higher ceilings in edge cases with very strong compensating factors, but we don't publish an unconfirmed single number as if it were an official HUD limit — ask your specific lender for their actual AUS approval range.
VA loans: no hard DTI cap, residual income instead
VA loans (for eligible veterans and service members) don't impose a fixed DTI ceiling at all. Lenders use ~41% DTI as an informal flag for closer review, but approval really depends on residual income — what's left over each month after your mortgage and other obligations, compared to a regional minimum based on family size and location. A borrower with high DTI but strong residual income can still qualify. This calculator doesn't have a dedicated VA preset because there's no single ratio to model — talk to a VA-approved lender for a residual-income-based estimate.
How the maximum price is actually solved
Given your income, debts, down payment, rate, property tax rate and insurance, the calculator solves algebraically (not by trial and error) for the home price where your monthly payment exactly hits whichever DTI cap binds first — because the principal-and-interest payment is a linear function of loan amount, the equation resolves to the cent. PMI is included if your down payment would leave you under 20% equity at that price; if it would not, PMI drops out and the calculator resolves the (slightly higher) PMI-free price instead.
Rate, property tax and insurance assumptions
The default rate, 6.55%, is the Freddie Mac Primary Mortgage Market Survey 30-year fixed average as of 2026-07-16 — this changes weekly, so treat the default as a snapshot and update it with the current PMMS figure for an accurate result. Property tax defaults to the 1.1% national average effective rate (Tax Foundation); real state rates span 0.28%-2.42% by state (Hawaii to New Jersey) — check your state's exact rate on our property tax calculator and enter it here for a precise estimate. PMI, when it applies, runs 0.3%-1.5%/yr depending on credit score and LTV depending on your credit score and loan-to-value.
What this calculator doesn't model
This is an educational estimate, not a mortgage pre-approval. It doesn't account for closing costs, HOA fees, a specific lender's overlays or exact AUS output, your actual credit score's precise effect on rate or PMI, or state/local transfer taxes. Property insurance is modeled as a flat annual dollar figure rather than scaling with home value or coverage details. Get pre-qualified with an actual lender for a number you can act on.
Frequently asked questions
What is the 28/36 rule for mortgage affordability?
Housing costs (principal, interest, tax, insurance) shouldn't exceed 28% of gross monthly income, and total debt payments (including housing) shouldn't exceed 36%. It's an industry rule of thumb, not a legal requirement.
How much house can I afford on $120,000 a year?
With no other debts, the 28% rule caps your housing payment at $2,800/month. The exact max home price also depends on your down payment, interest rate, property tax rate and insurance — enter your numbers in the calculator above for a precise figure.
What DTI ratio does FHA allow?
FHA's standard ratio is 31% front-end / 43% back-end. With Automated Underwriting and strong compensating factors, some lenders approve higher back-end ratios — this varies by lender, so we don't publish a single "maximum" figure as an official HUD limit.
Does VA have a maximum DTI?
No hard cap. VA lenders use roughly 41% DTI as an informal review trigger, but approval is really based on residual income — money left over after obligations, compared to a regional minimum. High DTI with strong residual income can still qualify.
When does PMI apply and how much is it?
Private mortgage insurance applies to conventional loans when your down payment is under 20% (loan-to-value over 80%). It typically runs 0.3%-1.5% of the loan amount per year depending on your credit score and LTV, and cancels automatically once you reach 78% LTV.
How current is the interest rate in this calculator?
The default, 6.55%, reflects the Freddie Mac PMMS 30-year fixed average as of 2026-07-16 — rates are published weekly and change often, so update the rate field with the latest figure from freddiemac.com/pmms for an accurate result.
Researched & verified by the Calcuris Data & Research Team. How we build and check our tools →