How Much House Can I Afford in 2024?

Our home affordability calculator determines how much home you can afford and the monthly mortgage payment that will be required. The debt-to-income (DTI) ratio plays a key role in our home affordability calculator because a DTI ratio of 36% serves as the benchmark for home affordability. Certain inputs are required such as your annual household income and total monthly debt expenses.

How Does the Home Affordability Calculator Work?

Our home affordability calculator determines the value of the home and the monthly mortgage payment you can afford based on your debt-to-income (DTI) ratio. It first calculates your DTI ratio using the total monthly income and debt payment information provided. The suggested DTI ratio for homeowners to maintain is 36% which means that your monthly debt and housing payments should account for no more than 36% of your monthly income. To find out your maximum mortgage payments, we subtract your monthly debt payments from 36% of your monthly income.

For example, if your monthly income is $5,000 and monthly debt expenses are $750, your current DTI ratio is 15% ($750/$5,000). Your maximum total payments with a DTI ratio of 36% is $1,800. Hence, you have $1,050 ($1,800 - $750) available for your monthly mortgage payment. Once the monthly mortgage payment is calculated, our home affordability calculator determines the maximum home price you could afford in your area.

How Much Mortgage Can I Afford?

Mortgages are one of the largest monthly expenses for most homeowners, which is why it is crucial to ensure that it is within budget. Our calculator requires basic inputs to determine your current debt payments and how much of your income is actually available for mortgage payments. It is also important to consider the amount of savings you have for the down payment and closing costs of the home. Our calculator lets you input the minimum down payment that you can pay and the rest of the home value is financed into the mortgage. Once these factors are taken into consideration, it is also wise to save some funds in the event of an unforeseen expense. A rule of thumb to prepare for unexpected expenses is to have three months of monthly debt and housing payments saved, just in case something goes wrong. If you believe that renting is the most optimal option, you can check rent affordability calculator to see how much you can afford paying in rent. You can also request a mortgage pre-approval letter from your lender to see how much you can spend on a house.

Estimated Home Affordability Map Based on Income

Factors Affecting How Much House I Can Afford

Credit Score

Credit score is a very important criterion in determining the mortgage rate you receive on your loan. In general, the minimum requirement for most conventional loans is 620. However, lenders prefer 720 or higher for lower rates. If these credit score requirements are too high for you then you should consider other loan options such as FHA loans for low-income earners, VA Loans for veterans, and USDA loans for homes in rural areas.

Down Payment

Larger down payments result in lower mortgage rates for the simple reason that there is less risk involved. The rationale behind this is that a larger down payment means greater equity in the home and smaller losses for the lender if you default on your monthly mortgage payments. Your down payment is linked to your loan-to-value (LTV) ratio, which is a financial risk measurement tool used by lenders. An LTV ratio of 80% or lower is preferred by lenders. The minimum down payment you are willing to put in will impact the mortgage rate you receive and whether you will have to pay for private mortgage insurance (PMI). PMI is required by lenders if your down payment is less than 20% of the home’s value. If a large down payment is too difficult for you then consider first-time homebuyer programs or federal assistance home loans.

How Down Payment Size Affects Home Affordability

The size of your down payment affects the amount of money that you will need to borrow in order to purchase a home. It also affects your mortgage interest rate and the types of home loans that you can qualify for. This all ties into home affordability. The larger your down payment, the more house you can afford. However, you’ll need to have enough savings in the first place for your down payment.

Impact of Down Payment on Home Affordability - $500,000 Home Price

This table looks at the impact of the size of your down payment on your home affordability, and is based on a home in California with a price of $500,000, a mortgage rate of 3%, and a term of 30 years.

The smaller the down payment, the higher your monthly payment will be. This increases the annual salary required in order to qualify for a mortgage of that size. For example, if you make a down payment of 5% on a $500,000 home, you’ll roughly need an annual salary of at least $114,000. Once your down payment is 20% or more, you won’t need to pay for private mortgage insurance. With a 20% down payment, your monthly payment will now be $2,153. You’ll only need an annual income of $92,000 to qualify for a $500,000 home.

This example uses a mortgage term length of 30 years. This spreads out your mortgage over a longer period of time, which makes the monthly payments smaller and more affordable. However, a longer mortgage term also increases the total interest that you will need to pay. If you can afford it, you may want to consider a 15-year mortgage vs a 30-year mortgage.

For example, let's look at a $500,000 home in California with a mortgage interest rate of 3% and a down payment of 20%. Getting a 15-year mortgage rather than a 30-year mortgage will save you over $109,000 in interest over the life of your loan. However, the monthly payments are also higher. A shorter mortgage term means that you will be able to afford less house, but you will save on interest costs. With a $120,000 annual salary, you can afford a $400,000 home with a 15-year mortgage, or you can afford to buy a $510,000 home with a 30-year mortgage.

15-Year vs 30-Year Mortgage Payments

Debt-To-Income (DTI) Ratio

The DTI ratio is the most important financial risk measuring tool used by lenders to determine mortgage eligibility. The DTI ratio is used by our home affordability calculator to determine how much of your monthly income can be spent on mortgage payments after your current monthly debt expenses have been paid. If you have a lower DTI ratio to begin with, such as if you have fewer debt obligations, then you have a greater capacity to pay for your mortgage payments and can afford a larger home.

It is very easy to calculate the DTI ratio: it is the fraction of your gross total monthly income that is spent on debt and interest repayments. For example, if your monthly income is $10,000 and monthly debt expenses are $3,000, then your DTI ratio is 30% ($3,000/$10,000). The following table shows what the various DTI ratio values mean:

Our calculator bases the mortgage payment on a DTI ratio of 36%, however, you may be comfortable to have a higher or lower DTI ratio and can choose to change this criterion by using the sliding scale. The highest possible DTI ratio allowed for home loans is 50%, following which lenders will view you as too risky as you have a higher chance of defaulting on one or more of your debt obligations.

What is the 28%/36% debt-to-income (DTI) ratio rule?

The 28%/36% rule is a guide for potential and existing homeowners stating that your total monthly housing costs should not exceed 28% of your monthly pre-tax income and all your monthly debts (including housing) should not exceed 36% of your monthly pre-tax income. The monthly housing expenses include mortgage payments, PMI, taxes, fees, and additional debt includes credit cards, student loans, auto loans, and other monthly debt payments.

This rule is just a suggestive guide for homeowners; you can choose to have a higher or a lower DTI ratio. If you are comfortable with a higher DTI ratio, you can afford a larger home on your salary as you will have more debt, whereas if you are risk-averse and want a lower DTI ratio, you will have to purchase a smaller home or lower your other debt payments.

The table below shows how the 28%/36% rule works, for example, if your monthly income is $5,000, your monthly mortgage payment should be no more than $1,400 ($5,000*28%) and your total monthly debt should be no more than $1,800 ($5,000*36%) which means other monthly debt is $400 ($1,800 - $1,400). As your income rises, a larger monthly mortgage payment can be made, and you can afford a larger home.

Mortgage Programs and Home Affordability

Debt-to-Income Ratio Limits by Mortgage Program

How much house can I afford with an FHA loan?

FHA loans are insured by the Federal Housing Agency and are aimed at individuals with low-income and little to no savings. FHA home loans have a minimum down payment of only 3.5% if you have a credit score higher than 580. If your credit score is higher than 500 but below 580 then a minimum down payment of 10% is required. All FHA loans have loan limits loan limits and require FHA mortgage insurance premium (MIP) to reduce the risk for the lender. If you have a poor credit score or a smaller down payment, an FHA loan can help you afford a larger loan than a conventional loan. You can use our FHA loan calculator to determine your monthly mortgage payment using a 3.5% down payment and FHA rates.

FHA loans have higher debt-to-income ratio rules compared to conventional loans. Instead of the 28%/36% rule, FHA loans have a 31%/43% rule. This means instead of having a maximum limit of 28% of your income going towards housing costs, you can have a maximum limit of 31% for FHA loans. Does this mean that you will be able to afford 3% more house with an FHA loan? Let’s take a look at a borrower in California with a $60,000 salary and a 20% down payment.

28% vs 31% Payments Affordability with FHA Loans

Based on a $60,000 salary, having a 31% payment limit instead of 28% means that you can afford a $362,000 home. That’s $37,000 more than you can get with a 28% limit.

The other benefit of FHA loans is the higher debt payments limit, at 43% instead of 36%. This means that FHA borrowers will be able to qualify with a slightly higher existing debt load compared to conventional borrowers.

How much house can I afford with a VA loan?

VA Loans are backed by the Veteran’s Administration and are targeted at eligible veterans and their spouses. VA home loans do not have a minimum down payment or credit score requirement, making them an affordable option for veterans. As a result of these benefits you can afford a larger home with a VA loan as compared to a conventional mortgage; however, you have to meet the strict eligibility requirements for this program. Most VA loans require an additional upfront payment known as the VA funding fee which is in the range of 0% - 2.3%. You can use our VA loan calculator to determine your monthly mortgage payment with the VA funding fee and current VA rates.

How does the ability to make a zero down payment affect your home affordability? It means that VA loan borrowers will be able to afford a home today even if they have no savings at all. For example, let’s consider a borrower with a $100,000 income and $0 in savings. No matter how much income they have, they won’t be able to qualify for a mortgage loan since they have no down payment. If they are eligible for a VA loan, they can qualify for a VA loan with no down payment. Also, just like FHA loans, VA loans have a higher maximum debt-to-income ratio at 41%. While it’s slightly below FHA loan’s limit of 43%, the DTI ratio for VA loans isn’t a hard limit. Instead, you may still qualify for a VA loan.

How much house can I afford with a USDA loan?

USDA Loans are insured by the United States Department of Agriculture and are targeted towards individuals in rural areas who are within the income limits. USDA loans do not have a minimum down payment or credit score requirement, however, there are strict eligibility requirements for this type of loan. The home you can afford with a USDA loan will be larger than a conventional mortgage as this type of loan has fewer loan requirements and eligibility criteria as long as you meet the USDA requirements. The USDA eligibility map and calculator can be used to determine if you are eligible for this type of loan.

USDA loans also have higher DTI ratio limits, at 29% for housing costs and 41% for total debt. This means that USDA loan borrowers can borrow a slightly larger mortgage amount and carry a slightly higher debt load compared to a conventional loan borrower.

How much house can I afford with a Jumbo loan?

Jumbo loans are mortgages that do not fit the conforming loans limits set by the Federal Housing Finance Association (FHFA). These mortgages are too large to be insured by agencies such as Fannie Mae and Freddie Mac. Therefore, this type of home loan has a larger minimum down payment and higher credit score requirements. If you have a high income and low DTI ratio you can afford a larger home with a jumbo loan as compared to a traditional mortgage.

Home Affordability FAQ

How much house can I afford on my salary?

Your home affordability depends on your salary since that’s what mortgage lenders use to determine if you can afford your mortgage payments and other housing costs. This also includes your property taxes. To calculate how much house you can afford with a specific annual salary, you can use the 28% debt-to-income ratio to get a rough estimate. This gives you the maximum monthly mortgage payment that you can comfortably afford at your salary level. Using a general mortgage calculator, you can then find how much that translates into when looking at mortgage sizes.

The following table shows how much house you can afford based on some common salaries. For a mortgage loan in California with an interest rate of 3%, a down payment of 20%, and a length of 30 years.

Estimated Home Affordability Based on Salary

With a $50k salary, the most that you will be able to comfortably afford in housing payments is $1,170 per month. That equals roughly a $270,000 home price. You can afford a $270,000 home with a $50k salary.

Common Salaries and Home Affordability

As your salary goes up, your affordability goes up. How much house can you afford on a $120k salary? The answer is roughly $655,000. To calculate how much house you can afford on your salary, use the house affordability calculator at the top of this page.

What is the most affordable state for buying a house?

According to Business Insider, the cheapest state to buy a house is West Virginia, with a median list price of $169,000. When looking at the most affordable city to buy a house, Forbes says that Detroit, Michigan is the most affordable, with a median listing price of just $59,000. That's well below the third-place runner up city of Toledo, Ohio, which has a median listing price of $95,000.

However, housing prices don’t reflect the total cost of living in any particular state. According to US News, Mississippi has the lowest cost of living in the United States, but it does have a slightly higher average home price at $252,725.

What is the least affordable city for buying a house?

According to Yahoo Finance and Insider Monkey, the least affordable city for buying a house in the United States is San Jose, Sunnyvale, and Santa Clara, California, which had a median single-family home price of $1.265 million in 2019. Next up is San Francisco and Oakland, with a median sales price of $988,000 for single family homes.

Least Affordable Cities for Buying a House (2019)

Source: Yahoo Finance

CBS News calculated the 10 most affordable counties in the US and the 10 least affordable counties. The most affordable county is Schuylkill County, Pennsylvania, while the least affordable county is Kings County (Brooklyn), New York. Nine out of the ten least affordable counties are in either New York or California.

Least Affordable Counties for Buying a House

Source: CBS News

What is the housing expense ratio?

The housing expense ratio is the total monthly payments that you make for housing expenses divided by your total monthly income. This includes your mortgage principal and interest payments, mortgage insurance premium, homeowner’s association (HOA) fees, and the cost of homeowners insurance .

This makes it different from your debt-to-income ratio, since your DTI ratio also includes your monthly debt obligations. The maximum allowed housing expense ratio is usually lower than the maximum DTI ratio allowed by lenders.

What is the maximum DTI allowed for FHA, VA, and USDA loans?

For FHA loans, the U.S. Department of Housing and Urban Development (HUD) allows a maximum housing expense ratio of 31% or less and a maximum DTI ratio of 43% or less, unless there are compensating factors. Factors that may allow a higher DTI ratio include the borrower making a larger down payment, a history of on-time payments, and cash reserves.

For VA loans, Department of Veterans Affairs underwriting guidelines recommend a DTI ratio of 41% or less. Having a higher DTI ratio is allowed, but it will require greater scrutiny.

The USDA allows a maximum housing expense ratio of 29% and a maximum DTI ratio of 41%.

What is the maximum DTI allowed for conventional loans?

The Consumer Financial Protection Bureau allows a DTI ratio above 43%, but requires lenders to base the maximum amount the borrower can afford based on their “ability-to-repay”. Prior to July 1, 2021, the CFPB only allowed a maximum DTI ratio of 43%. This limit was removed in 2021. Now, lenders just have to consider the borrower’s ability to repay based on income and assets compared to current debt obligations.

Through the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is the federal regulator of commercial banks and credit unions with more than $10 billion in assets. These larger lenders will need to follow the CFPB's rules which implements the Federal Truth in Lending Act.

Mortgage loans from large lenders with a DTI ratio over 43% are not allowed to be considered as qualified mortgages. Non-qualified mortgages do not conform to the Dodd–Frank Wall Street Reform and Consumer Protection Act, which means that they may have a higher interest rate. Smaller lenders, which the CFPB defines as having assets less than $2 billion, are allowed to lend loans with a DTI ratio over 43% and still consider them to be qualified mortgages.