1. Convert income and set two budgets
Monthly income G is annual income ÷ 12, or the monthly figure you typed. Front-end housing budget is G × front-end cap. Back-end housing budget is G × back-end cap − monthly debts. The allowed housing payment H is the smaller of those two, or zero if debts already consume the back-end cap.
2. Build a monthly mortgage factor
For annual rate i and term years N, the monthly rate is r = i / 12 and the term is n = 12N months. The payment per dollar of loan is:
k = r (1+r)n / ((1+r)n − 1)
If the rate is 0%, k = 1/n. Principal and interest on a loan L is L × k.
3. Add housing costs that are not the note
- Property tax: annual percent of price ÷ 12, or a fixed monthly dollar amount.
- Insurance: monthly dollars, or an annual percent of price ÷ 12.
- HOA: monthly dollars.
- Optional MI: if down payment implies LTV above 80%, add 0.55% of the loan per year ÷ 12. That is a stand-in for conventional PMI or FHA annual MIP, not a priced quote.
4. Solve for price and loan
Housing payment equals P&I + tax + insurance + HOA + MI, and that sum must equal H. If the down payment is a dollar amount D, price is loan + D. If the down payment is a percent d, loan is price × (1 − d). HouseAfford solves that linear relationship for price (and therefore loan). If a financed solution does not exist because carrying costs eat H, it tries a cash purchase limited by the cash you entered.
5. What we leave out on purpose
- Credit score, DTI exceptions, and automated-underwriting overlays.
- Upfront FHA MIP (often 1.75% of base loan) and financed UFMIP.
- Discount points, origination fees, and prepaid interest.
- Closing costs, except to the extent you reduced cash in the down-payment field.
- Ground rent, flood insurance as a separate line, and solar leases.
- Residual-income tests used by VA.
Those items change a real approval. They are documented here so the screen is not mistaken for a Loan Estimate.
Sources and presets
Conventional 28/36 follows long-standing consumer housing-expense tables discussed alongside Fannie Mae selling-guide ratio concepts. FHA 29/41 is the conservative education pair; HUD 4000.1 manual underwriting often cites 31/43. CFPB consumer materials describe DTI as a core qualification metric. HouseAfford is not endorsed by those agencies.
Open the calculator or the DTI explainer next.
HouseAfford is an educational estimate, not a pre-approval, pre-qualification, or offer to lend. Lenders also weigh credit, assets, employment, property type, and automated underwriting. Actual approval and payment will differ.