Purpose and steps
Housing budget = min(gross monthly income × housing ratio, gross monthly income × total DTI limit − existing debt). Solve the home price whose mortgage, tax, insurance, HOA and PMI fit that budget. The calculation runs locally and keeps cash-flow timing consistent with the stated assumptions.
- Confirm currency and monthly versus annual amounts. U.S. tax and loan models should be used within their stated scope.
- Prepare Annual gross household income, Existing monthly debt payments, Available down payment, Annual interest rate, Loan term, Annual property tax rate, Annual homeowners insurance, Monthly HOA dues, Annual PMI rate, Housing / gross income limit, Total debt / gross income limit. Defaults demonstrate the model rather than your personal circumstances.
- Check the headline result and its components. A key interpretation for this tool is: The default 28% and 36% ratios are planning assumptions, not universal lender rules.
- Compare the baseline with a changed scenario: A larger down payment can reduce both financed principal and PMI.
Input reference and units
These values reproduce the model’s demonstration. Replace them with your own records or measurements; they are not recommended targets.
On a small screen, swipe the table horizontally to see all columns.
| Parameter | Demonstration value | How to enter it |
|---|---|---|
| Annual gross household income | 100000 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Existing monthly debt payments | 500 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Available down payment | 80000 USD | Check the unit carefully: some tools use a percentage and others a cash amount. |
| Annual interest rate | 6.5 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Loan term | 30 years | Use years here. The model converts to months when the payment schedule requires it. |
| Annual property tax rate | 1.2 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Annual homeowners insurance | 1800 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Monthly HOA dues | 0 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Annual PMI rate | 0.5 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Housing / gross income limit | 28 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Total debt / gross income limit | 36 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
Model-specific method
How this calculator produces its result
Housing budget = min(gross monthly income × housing ratio, gross monthly income × total DTI limit − existing debt). Solve the home price whose mortgage, tax, insurance, HOA and PMI fit that budget.
Annuities and the remaining-balance recurrence
A fixed-payment loan is an annuity: the discounted value of all future payments equals the amount borrowed today. Summing that geometric series gives the monthly-payment equation. Match the rate and time unit: monthly payments use an annual nominal rate divided by twelve and a term counted in months.
Each payment is split into interest and principal. Interest uses the opening balance, so paying extra principal now reduces later interest. A zero rate must use P/n rather than the formula’s zero-over-zero form. Keep full precision during the schedule and round only for display; a lender may round each actual posting differently.
P = Σ[t=1…n] M/(1+r)^t M = Pr / (1 − (1+r)^−n) Iₜ = Bₜ₋₁r; Bₜ = Bₜ₋₁ + Iₜ − paymentₜ
- P: principal today
- r: rate per payment period, not the annual percentage
- n: number of payment periods
- M: scheduled payment; B: remaining balance
Worked example
At $100,000 annual income, $500 monthly debt, and 28% / 36% limits, the housing budget is the lesser of $2,333.33 and $2,500, before translating it into a home price.
Reproduce the default scenario
This is a separate example, calculated using the exact engine on the tool page and the defaults in the input reference above. Health examples use metric units. Displayed rounding may differ from intermediate precision.
- Estimated maximum home price
- 367,313.92 USD
- Available monthly housing budget
- 2,333.33 USD
- Estimated monthly housing payment
- 2,333.33 USD
- Loan amount
- 287,313.92 USD
- Down payment
- 80,000 USD
- Housing / gross income
- 28%
- Total debt / gross income
- 34%
Reading results without overstating them
- The default 28% and 36% ratios are planning assumptions, not universal lender rules.
- A larger down payment can reduce both financed principal and PMI.
Assumptions and exclusions
- This is not preapproval. Credit score, reserves, lending program, local taxes, income stability, closing costs and actual underwriting can change the result.
Sources and content notes
Toolify describes the implemented algorithm and its assumptions. Sources below support the topic or applicable rules; they do not endorse this calculator. Examples are illustrative, and published rules take precedence over simplified estimates.
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