How Much House Can You Afford?

Gross Monthly Income

\$
\$
\$
\$
Total monthly income: \$0

New Home Info

\$
years
%
\$
per year
\$
per year

Monthly Expenses

\$
\$
\$
\$
Total monthly expenses: \$0

Total monthly expenses (including insurance and real estate tax payments)

? Play around with the numbers, hit Calculate and save the results by sending them to your email.

Available Mortgage Limits:

 Available mortgage payment: \$0 Affordable home amount: \$0

• How much money can I borrow for a mortgage?

Use this calculator to figure out how much money you can borrow.

• Ready to stop renting and buy a home?

Thinking of buying a home? Consider these factors before making your decision.

• 5 first-time homebuyer mistakes

Avoid these common mistakes when buying your first home.

How much house can you buy?

Mortgage lenders calculate affordability based on your personal information, including income, debt expenses and size of down payment. The mortgage calculator uses similar criteria.

Here are some of the factors that lenders consider.

Debt-to-income ratios

Lenders will calculate how much of your monthly income goes toward debt payments. This calculation is called a debt-to-income ratio.

Debt-to-income ratio

Percentage of monthly income that is spent on debt payments, including mortgages, student loans, auto loans, minimum credit card payments and child support.

Debt payments / income

For example: Jessie and Pat together earn \$10,000 a month. Their total debt payments are \$3,800 a month. Their debt-to-income ratio is 38 percent.

\$3,800 / \$10,000 = 0.38

Front-end ratio

A standard rule for lenders is that your monthly housing payment (principal, interest, taxes and insurance) should not take up more than 28 percent of your income before taxes. This debt-to-income ratio is called the "housing ratio" or "front-end ratio."

Back-end ratio

Lenders also calculate the "back-end ratio." It includes all debt commitments, including car loan, student loan and minimum credit card payments, together with your house payment. Lenders prefer a back-end ratio of 36 percent or less.

Ratios aren't carved in stone

Those recommended ratios (28 percent front-end and 36 percent back-end) aren't ironclad. In many cases, lenders approve applicants with higher debt-to-income ratios. Under the "qualified mortgage rule," federal regulations give legal protection to well-documented mortgages with back-end ratios (all debts, including house payments) up to 43 percent.

"That's been one of the bigger drivers (of affordability) because that is basically drawing a box around what's a qualified mortgage," says Tim Skinner, home lending sales and service manager for Huntington Bank in Columbus, Ohio. "A large portion of the lending community has decided to stay in that box."

Credit history

If you have a good credit history, you are likely to get a lower interest rate, which means you could take on a bigger loan. The best rates tend to go to borrowers with credit scores of 740 or higher.

Down payment

With a larger down payment, you will likely need to take on a smaller loan and can afford to buy a higher-priced house.

Down payment

Money from your savings that you give to the home's seller. A mortgage pays the rest of the purchase price. It's usually expressed as a percentage: On a \$100,000 home, a \$13,000 down payment would be 13 percent.

You don't need to have a perfect credit score or a 20 percent down payment to qualify for a mortgage. Some lenders will accept down payments as small as 3 percent. Federal Housing Administration-insured mortgages have a minimum down payment of 3.5 percent.

Lifestyle factors

While the lender's guidelines are a good place to start, consider how your lifestyle affects how much of a mortgage you can take on. For instance, if you send your children to a private school, that is a major expense that lenders don't typically account for. Or maybe you like to spend a lot on dining out or clothes. And if you live in a city with good public transportation, such as San Francisco or New York, and are able to rely on public transportation, you can likely afford to spend more on housing.

Consider all your options

Look into various state government programs that provide certain concessions, especially for first-time homebuyers. There also are programs that you might qualify for based on your income or occupation. You may be able to get assistance with your down payment so you can take on a smaller loan.

Nikitra Bailey, executive vice president for the Center for Responsible Lending in Durham, North Carolina, says, "A lot of creditworthy borrowers have been unable to secure mortgages in the tighter mortgage environment. We are hopeful that these efforts will open up credit for borrowers who are deserving so that we will see an increase in first-time homebuyers going forward."