CalculateY
Quick Answer
On a $100,000 annual income with $500 in monthly debts and a $50,000 down payment at 6.5% for 30 years, the estimated maximum home price is approximately $390,000, with an estimated monthly payment of approximately $2,150.
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Common Examples
| Input | Result |
|---|---|
| $75,000 income, $300 debts, $20,000 down, 7% rate, 30 years | Estimated max home price: approximately $285,000 |
| $100,000 income, $500 debts, $50,000 down, 6.5% rate, 30 years | Estimated max home price: approximately $390,000 |
| $120,000 income, $800 debts, $60,000 down, 6% rate, 30 years | Estimated max home price: approximately $470,000 |
| $150,000 income, $1,000 debts, $100,000 down, 6% rate, 15 years | Estimated max home price: approximately $450,000 |
How It Works
This calculator uses the 28/36 rule, the standard guideline used by most lenders to evaluate mortgage eligibility:
Front-end ratio (28% rule): Your total monthly housing costs (principal, interest, property tax, insurance, and HOA) should not exceed 28% of your gross monthly income.
Back-end ratio (36% rule): Your total monthly debt payments (housing costs plus all other debts) should not exceed 36% of your gross monthly income.
The calculator takes the more restrictive of these two limits. From the maximum allowable housing payment, it subtracts estimated property tax, insurance, and HOA to determine the maximum principal and interest (P&I) payment. It then uses the standard mortgage formula to back-calculate the maximum loan amount:
Max Loan = Max P&I / [r(1+r)^n / ((1+r)^n - 1)]
Where r is the monthly interest rate and n is the total number of payments. The estimated maximum home price equals the maximum loan amount plus the down payment.
Property tax and insurance are calculated as annual percentages of the home value, divided by 12 for the monthly cost. Because these costs depend on the home price, the calculator solves the equation simultaneously.
Worked Example
For $100,000 annual income, $500 monthly debts, $50,000 down payment, 6.5% rate, 30 years, 1.2% property tax, 0.35% insurance, $0 HOA: Gross monthly income = $8,333. Front-end max (28%) = $2,333. Back-end max (36%) = $3,000, minus $500 debts = $2,500. The lower limit is $2,333. After accounting for property tax and insurance (which depend on home price), the calculator determines an estimated maximum home price of approximately $390,000 with an estimated monthly P&I payment of approximately $2,150.
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