- Debt-to-income ratio (DTI)
- Monthly debt payments divided by gross monthly income. The back-end ratio counts the new housing payment plus car, student loan, credit card and other debt payments. A 43% back-end ratio is a common guideline (CFPB), not a law, and lenders set their own limits. This calculator finds the highest price that stays within both ratios you enter.
- Front-end ratio
- The housing payment alone divided by gross monthly income. Housing here means principal, interest, property tax, homeowners insurance, PMI and HOA dues. It ignores other debts, so it caps the price for borrowers with little debt, while the back-end ratio usually caps it for borrowers with larger car or student loan payments.
- Gross income
- Income before taxes and payroll deductions, which is what lenders use for DTI. This calculator adds your income, any co-borrower income and other regular income such as bonuses or rent, then divides by 12. Lenders usually count only income that is documented and likely to continue.
- Down payment
- The cash paid toward the purchase price at closing; the loan covers the rest. In this calculator, the down payment is added to the maximum loan your income supports to reach the maximum home price. A down payment under 20% of the price usually adds PMI on a conventional loan, which lowers the price you can afford.
- PITI
- Principal, interest, taxes and insurance: the four parts of a typical monthly mortgage payment. Lenders measure affordability against PITI, not just principal and interest. This calculator’s monthly payment is PITI plus PMI and HOA dues, the full figure that is tested against your DTI limits.
- PMI
- Private mortgage insurance, which protects the lender on a conventional loan when the down payment is under 20%. It is quoted as an annual percentage of the loan and paid monthly. It can be canceled on request once the balance reaches 80% of the original value and ends automatically at 78% (Homeowners Protection Act).
- Interest rate
- The annual percentage the lender charges on the unpaid balance, before fees. It sets how much loan a given monthly payment supports: at a higher rate, more of each payment goes to interest, so the same income qualifies for a smaller loan and a lower home price in this calculator.
- Property tax
- The annual tax a local government charges on real estate, entered here as a percentage of the home’s value. It rises with the price, so it is recalculated for each price the calculator tests. Rates differ widely by county and city, and a high rate can reduce the affordable price noticeably.
- Homeowners insurance
- Coverage for the home and its contents against damage and for liability, required by mortgage lenders. It is entered here as a yearly premium and divided by 12 in the monthly payment. It is usually paid through an escrow account along with property tax.
- HOA fees
- Dues paid to a homeowners association for shared upkeep, amenities and sometimes insurance on common areas. Lenders count them in the housing payment for DTI even though they are not part of the mortgage. In this calculator, every dollar of monthly HOA dues reduces the loan amount your income can support.
