House Affordability Calculator

In the United States, mortgage lenders—including those offering conventional and FHA loans—commonly use two key financial ratios to determine how much they’re willing to lend: the front-end and back-end debt-to-income (DTI) ratios. These ratios help assess how much of your income goes toward housing and other recurring debt. To explore more or run detailed DTI calculations, check out our [Debt-to-Income (DTI) Ratio Calculator].

Understanding Debt-to-Income Ratios (DTI)

Lenders use DTI ratios to evaluate the financial risk of lending. As a homebuyer, reducing your DTI not only improves your chances of qualifying for a loan but can also secure more favorable mortgage terms. A lower DTI signals that you are more likely to manage mortgage payments responsibly.

Front-End Ratio (Housing Ratio)

The front-end ratio—also known as the mortgage-to-income ratio—measures how much of your gross monthly income goes toward housing expenses.

Formula:
Front-End Ratio (%) = (Monthly Housing Costs / Monthly Gross Income) × 100

Monthly housing costs typically include:

• Principal and interest payments on the loan

• Property taxes

• Homeowners insurance

• HOA or Co-op fees (if applicable)

This ratio is mainly used in conventional and FHA loan evaluations.

Back-End Ratio (Total DTI Ratio)

The back-end ratio includes all monthly housing expenses plus other recurring debts such as:

• Car loans

• Student loans

• Credit card payments

Formula:
Back-End Ratio (%) = (Monthly Housing Costs + Other Monthly Debts) / Monthly Gross Income × 100

This is the primary DTI ratio used in our calculator to assess affordability.

Conventional Loans and the 28/36 Rule

Conventional loans are mortgages not backed by the federal government. These loans follow standards set by government-sponsored enterprises like Fannie Mae and Freddie Mac, and they can be either conforming (meeting GSE guidelines) or non-conforming (not meeting those standards but still privately funded).

The 28/36 Rule is a common guideline for conventional loans:

• No more than 28% of gross monthly income should go to housing expenses (front-end).

• No more than 36% should go to total monthly debts (back-end).

Though widely used, this rule isn’t always strictly enforced—especially in competitive lending environments where lenders may take on higher-risk borrowers.

FHA Loans

Learn more or calculate payments with our [FHA Loan Calculator].

FHA loans, insured by the Federal Housing Administration, are popular among first-time homebuyers. They come with:

• Lower down payment requirements

• Flexible credit standards

• Mandatory mortgage insurance premiums (MIP)

To qualify, borrowers must usually meet a 31/43 DTI rule:

• Front-end DTI must not exceed 31%

• Back-end DTI must not exceed 43%

FHA loans also require a 1.75% upfront insurance premium and allow slightly higher DTIs compared to conventional loans.

VA Loans

Use our [VA Mortgage Calculator] to learn more about VA loans and estimate monthly payments.

VA loans are designed for eligible military members, veterans, and some surviving spouses. Guaranteed by the U.S. Department of Veterans Affairs, these loans offer:

• No down payment options

• Competitive interest rates

• No private mortgage insurance (PMI) requirement

While the VA does not typically set a front-end DTI, it expects a back-end ratio of 41% or less for approval.

Custom DTI Options

Our calculator also gives you the flexibility to choose DTI limits between 10% and 50% (in 5% steps). If your down payment is under 20%, an additional 0.5% for PMI is automatically included to reflect standard conventional loan assumptions.

• Use lower DTIs for conservative, budget-friendly scenarios

• Choose higher DTIs if you’re comfortable taking on more financial risk

A good starting point is the 28/36 Rule, especially if you’re unsure which setting to use.

What If You Can’t Afford the Home You Want?

If a home is currently out of reach, consider the following strategies to improve affordability over time:

• Pay Down Existing Debt: Lowering your overall debt—like car loans or student loans—can reduce your DTI and improve your loan eligibility.

• Boost Your Credit Score: A stronger credit score can qualify you for better interest rates, which lowers monthly payments and increases affordability.

• Save for a Larger Down Payment: This reduces the loan amount needed and may help secure lower interest rates.

• Build Up Your Savings: Lenders often consider your savings as a sign of financial responsibility, which can support your mortgage application.

• Increase Your Income: Although it takes effort, increasing your earnings can significantly improve your DTI and borrowing capacity.

Improving even one of these factors can increase your chances of qualifying for a mortgage. If homeownership still seems out of reach, you might explore more affordable housing markets, assistance programs, or consider renting temporarily while building a stronger financial foundation. To evaluate your rental options, try our [Rent Calculator].