Maximum Mortgage Calculator
Front-end ratio (housing expenses): Typically ≤ 28%
Back-end ratio (total debt): Typically ≤ 36%
Some lenders allow up to 43-50% DTI for qualified buyers
DTI = (Total Monthly Debt ÷ Gross Monthly Income) × 100
Principal & Interest: Base mortgage payment
Property Taxes: Typically 1-2% of home value annually
Home Insurance: Varies by location and coverage
PMI: Required if down payment < 20%
| Date | Annual Income | Down Payment | Max Home Price | Monthly Payment | Currency | Actions |
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Maximum Mortgage Calculator: Your Complete Guide
Learn how to calculate exactly how much house you can afford with our easy-to-use calculator
Buying a home is one of the biggest financial decisions you'll ever make. Knowing exactly how much you can afford before you start house hunting saves time, prevents disappointment, and ensures you make a smart financial decision. Our Maximum Mortgage Calculator helps you determine your exact borrowing power based on your complete financial picture.
Try Our Maximum Mortgage Calculator
Input your financial details to discover your maximum home price, loan amount, and monthly payment.
Understanding the Calculator Fields
Let's break down each field in simple, easy-to-understand language with practical examples.
Annual Income
What it is: Your total yearly income before taxes and deductions.
Why it matters: Lenders use your income to determine how much you can afford to repay.
Example:
If you earn $75,000 per year from your job and $5,000 from freelance work, your total annual income is $80,000.
Tip
Include all reliable income sources: salary, bonuses, commissions, freelance income, rental income, and investment income. Be conservative with variable income.
Down Payment
What it is: The amount of cash you pay upfront for the home.
Why it matters: A larger down payment means you need to borrow less, which reduces your monthly payment and may eliminate the need for private mortgage insurance (PMI).
Example:
For a $400,000 home, a 20% down payment would be $80,000. A 10% down payment would be $40,000.
Formula:
Down Payment = Home Price × Down Payment Percentage
Property Taxes
What it is: Annual taxes paid to your local government, usually calculated as a percentage of your home's value.
Why it matters: Property taxes are included in your monthly mortgage payment through an escrow account.
Example:
If your home is valued at $350,000 and your local tax rate is 1.5%, your annual property taxes would be $5,250 ($437.50 monthly).
Formula:
Monthly Property Tax = (Home Value × Tax Rate) ÷ 12
Homeowners Insurance
What it is: Insurance that protects your home from damage and theft.
Why it matters: Required by lenders and included in your monthly payment through escrow.
Example:
Average annual homeowners insurance in the US is about $1,200-$1,500, or $100-$125 monthly.
Association Fees/Dues
What it is: Monthly fees for condominiums, townhouses, or planned communities that cover shared amenities and maintenance.
Why it matters: These are additional monthly costs that affect your affordability.
Example:
Condominium association fees typically range from $200 to $500 monthly, depending on amenities.
Monthly Debt Payments
These are your current monthly debt obligations that lenders consider when calculating your debt-to-income ratio.
Personal Loans
What it is: Monthly payments for any personal loans you have.
Example:
If you borrowed $10,000 for home improvements at 8% interest over 3 years, your monthly payment would be about $313.
Car Loans/Leases
What it is: Monthly payments for your vehicle financing.
Example:
A $30,000 car loan at 4% interest over 5 years has a monthly payment of about $552.
Student Loans
What it is: Monthly payments for your education loans.
Example:
$40,000 in student loans at 5% interest over 10 years has a monthly payment of about $424.
Other Loans
What it is: Any other monthly debt payments not mentioned above.
Example:
This could include medical debt payments, timeshare payments, or business loan payments.
Interest Rate
What it is: The annual cost of borrowing money, expressed as a percentage.
Why it matters: Even small differences in interest rates can significantly impact your monthly payment and total loan cost.
Example:
A $300,000 loan at 3.5% interest has a monthly payment of $1,347. The same loan at 4.5% has a monthly payment of $1,520 - that's $173 more per month!
Monthly Interest Formula:
Monthly Interest Rate = Annual Interest Rate ÷ 12
Repayment Period (Years)
What it is: The length of time you have to repay the loan.
Why it matters: Longer terms mean lower monthly payments but more total interest paid over the life of the loan.
Example:
A $300,000 loan at 4% for 15 years: $2,219 monthly, total interest $99,431
The same loan for 30 years: $1,432 monthly, total interest $215,609
You save $102,178 in interest with the 15-year loan but pay $787 more monthly.
Max Debt-to-Income Ratio (DTI)
What it is: The percentage of your monthly income that goes toward debt payments.
Why it matters: Lenders use DTI to assess your ability to manage monthly payments.
DTI Formula:
DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100
Example:
If your monthly income is $6,000 and your total debt payments (including new mortgage) are $2,100, your DTI is 35%.
Lender Guidelines
Front-end ratio (housing only): Typically 28% maximum
Back-end ratio (all debt): Typically 36% maximum
Some programs allow up to 43-50% for qualified buyers
How the Calculator Works: The Math Behind the Scenes
Step 1: Calculate Maximum Monthly Payment
Max Monthly Payment = (Monthly Income × Max DTI %) - Existing Monthly Debt
Example Calculation:
Monthly Income: $100,000 ÷ 12 = $8,333
Max DTI: 36%
Max Total Debt: $8,333 × 0.36 = $3,000
Existing Debt: $500
Max Mortgage Payment: $3,000 - $500 = $2,500
Step 2: Calculate Maximum Loan Amount
Using the mortgage payment formula (present value of an annuity):
Loan Amount = Monthly Payment × [(1 - (1 + r)^-n) ÷ r]
Where:
r = monthly interest rate (annual rate ÷ 12)
n = total number of payments (years × 12)
Step 3: Calculate Maximum Home Price
Max Home Price = Max Loan Amount + Down Payment
Frequently Asked Questions (FAQ)
Here are answers to the 15 most common questions about maximum mortgage calculations:
Front-end ratio only includes housing expenses: mortgage principal and interest, property taxes, homeowners insurance, and association fees.
Back-end ratio includes all debt payments: housing expenses plus credit cards, car loans, student loans, and other monthly obligations.
Example: If your monthly income is $6,000, a 28% front-end ratio allows $1,680 for housing. A 36% back-end ratio allows $2,160 for all debts including housing.
Your credit score affects:
- Interest rate: Higher scores get lower rates (e.g., 720+ score might get 3.5%, 650 score might get 4.5%)
- Loan approval: Most lenders require minimum scores (often 620 for conventional loans)
- Private Mortgage Insurance (PMI): Better scores may qualify for lower PMI rates
- Down payment requirements: Lower scores may require larger down payments
Traditional goal: 20% of home price
Benefits of 20% down:
- No Private Mortgage Insurance (PMI)
- Lower monthly payments
- Better interest rates
- More equity immediately
Low down payment options:
- FHA loans: 3.5% down (requires mortgage insurance)
- VA loans: 0% down for eligible veterans
- USDA loans: 0% down in rural areas
- Conventional loans: As low as 3% for first-time buyers
PMI protects the lender if you default on your loan. It's required when your down payment is less than 20%.
Typical PMI costs: 0.5% to 1.5% of the loan amount annually
Example:
For a $300,000 loan with 10% down:
Loan amount: $270,000
PMI at 1% annually: $2,700 per year or $225 per month
PMI typically cancels automatically when you reach 22% equity or can be removed at 20% equity with a request.
Property taxes are usually included in your monthly mortgage payment through an escrow account.
Property Tax Calculation:
Annual Tax = Home Value × Tax Rate
Monthly Tax = Annual Tax ÷ 12
Example:
$400,000 home × 1.25% tax rate = $5,000 annual tax
$5,000 ÷ 12 = $416.67 monthly
Tip: Research property tax rates in your desired area - they vary widely by location.
Your monthly payment typically includes four components (PITI):
- Principal: Repayment of the loan amount
- Interest: Cost of borrowing the money
- Taxes: Property taxes (held in escrow)
- Insurance: Homeowners insurance (held in escrow)
Plus possibly:
- Private Mortgage Insurance (if down payment < 20%)
- Homeowners Association (HOA) fees
- Special assessments
Comparison: $300,000 loan at 4% interest
15-year term:
- Monthly payment: $2,219
- Total interest: $99,431
- Total paid: $399,431
30-year term:
- Monthly payment: $1,432
- Total interest: $215,609
- Total paid: $515,609
The 30-year loan costs $116,178 more in interest but has a monthly payment $787 lower.
Yes! Lower interest rates significantly increase your buying power.
Example: $2,000 monthly budget
At 5% interest: You can borrow about $372,000
At 4% interest: You can borrow about $418,000
At 3% interest: You can borrow about $474,000
A 1% rate drop increases borrowing power by about $46,000!
Closing costs are fees paid at closing, typically 2-5% of the home price.
Common closing costs include:
- Loan origination fee: 0.5-1% of loan
- Appraisal fee: $300-$500
- Title insurance: 0.5-1% of home price
- Attorney fees: $500-$1,500
- Recording fees: $50-$500
- Prepaid items: Taxes, insurance, interest
Example:
For a $400,000 home with 3% closing costs: $12,000
This is in addition to your down payment!
Every dollar of monthly debt reduces your mortgage affordability.
Debt Impact Formula:
For each $100 of monthly debt, you can borrow about $20,000 less
Example:
If you have $500 in monthly debt payments, you can borrow about $100,000 less than someone with no debt (at the same income level).
That $500 car payment could mean the difference between a $300,000 home and a $400,000 home!
Yes, but conservatively:
- Most lenders require 2-year history of bonus/commission income
- They typically average the last 2 years
- If income varies significantly, they may use the lower year
- Seasonal or irregular income may require special documentation
Example: If you earned $20,000 in bonuses last year and $25,000 the year before, lenders might use the average: $22,500 annually.
The 28/36 rule is a common mortgage guideline:
- 28%: Your monthly housing costs should not exceed 28% of your gross monthly income
- 36%: Your total monthly debt payments should not exceed 36% of your gross monthly income
Example:
Monthly income: $6,000
Max housing payment (28%): $1,680
Max total debt (36%): $2,160
If you have $400 in other debt, your max mortgage payment would be: $2,160 - $400 = $1,760
Increase your buying power:
- Increase income: Raise, promotion, second job
- Reduce debt: Pay off credit cards, car loans
- Save larger down payment: 20% avoids PMI
- Improve credit score: Lower interest rates
- Consider longer term: 30-year vs 15-year mortgage
- Shop around: Different lenders offer different rates
- Buy points: Pay upfront to lower interest rate
Mortgage points (discount points) are fees paid to lower your interest rate.
- 1 point = 1% of the loan amount
- Typically lowers rate by 0.25%
- Tax deductible in the year paid
Break-even analysis:
$300,000 loan, 4.25% rate
Buy 1 point for $3,000 → 4% rate
Monthly savings: $44
Break-even: $3,000 ÷ $44 = 68 months (5.7 years)
Buy points if: You'll stay in the home beyond the break-even period
Additional homeownership costs:
- Maintenance: 1-2% of home value annually ($4,000-$8,000 on $400,000 home)
- Utilities: Electricity, gas, water, sewer, trash ($200-$500 monthly)
- Landscaping/yard care: $50-$300 monthly
- Home improvements: Remodels, updates, repairs
- Furniture/appliances: New home often needs these
- Emergency fund: 3-6 months of expenses minimum
Budget Rule
Budget for total housing costs (mortgage + extras) not to exceed 35-40% of your take-home pay, not gross income.