How lenders estimate what you can afford
Mortgage affordability isn't just about how large a loan you'd like — lenders apply structured guidelines to assess how much you can reasonably repay without overextending. The most widely referenced framework is the 28/36 rule, used here to estimate a reasonable home price range.
The "28" refers to the front-end ratio: housing costs shouldn't exceed 28% of gross monthly income. The "36" refers to the back-end ratio: total debt payments, including housing, shouldn't exceed 36% of gross monthly income. Your actual affordable mortgage payment is capped by whichever of these two limits is more restrictive given your specific debt situation.
Working backward to a home price
Once the maximum monthly payment is known, this calculator reverses the standard loan amortization formula to solve for the largest loan amount that fits within that payment, at your specified interest rate and term. Adding your down payment to that loan amount gives the maximum home price.
This is a guideline, not a guarantee
Actual lending decisions also weigh credit history, employment stability, cash reserves, and lender-specific policies that vary by institution and loan program. Treat this calculator as a reasonable starting estimate for your own planning, not a substitute for a formal mortgage pre-approval.