How affordability is calculated
Lenders cap your total monthly debts (including the new mortgage) at a percentage of gross monthly income — typically 43-50%. Your max mortgage payment is:
From that, we back out the principal + interest portion (subtracting property tax and insurance), then use the loan EMI formula in reverse to find the maximum loan amount you can support.
The 28/36 rule
A classic guideline: housing costs (PITI) should not exceed 28% of gross monthly income, and total debt payments should not exceed 36%. Banks often allow up to 43-50% today, but staying near 28/36 is the safer zone.
FAQ
Does this include HOA fees?
The calculator lumps HOA into "tax + insurance" as a % of home value. If you have a specific HOA amount, estimate the % and add it to the tax field.
Can I afford more than this?
You CAN usually borrow more — lenders look at max ratios. Whether you SHOULD is a different question. This calculator stays on the conservative side.