House Affordability Calculator Determine how much home you can *realistically* afford — with DTI rules, cash flow analysi...
House Affordability Calculator
Determine how much home you can *realistically* afford — with DTI rules, cash flow analysis, and stress testing.
Standard DTI Rules**:
- Front-End DTI** ≤ 28%: Housing (PITI) ÷ Gross Income
- Back-End DTI** ≤ 36% (Conventional) or ≤ 50% (FHA/Fannie with reserves)
Formula**:
$$\text{Max Housing Payment} = \text{Gross Monthly Income} \times 0.28 - \text{Other Housing Costs}$$
Example: $85K income ($7,083/mo), $500 debt: • Max PITI = $7,083 × 0.28 = **$1,983** • At 6.8%, 20% down → **$340K home** • PITI = $1,983 + $200 tax/ins = **$2,183 total** (30.8% DTI)
✅ Pro Tip**: Lenders use *gross* income — but you should budget on *net*.
⚠️ Avoid these dangerous situations:
- DTI > 43% without reserves** — high risk of default (CFPB threshold)
- No emergency fund** — 68% of Americans can’t cover $1K crisis (Bankrate)
- Stretching for “2.5x income”** — ignores rate spikes (6% → 8% = +$300/mo)
- Ignoring maintenance** — $350K home = $3,500/yr repairs (1%)
✅ Safe Buying Checklist**:
- DTI ≤ 36% (front-end ≤ 28%)
- 3–6 months expenses saved *after* down payment + closing
- Property tax + insurance ≤ 25% of PITI
- No major life changes in next 2 years (kids, relocation, grad school)
| Income | Debt | Affordable Home | PITI | DTI |
|---|---|---|---|---|
| $60K | $0 | $240K | $1,380 | 27.6% |
| $85K | $500 | $340K | $2,180 | 30.8% |
| $120K | $0 | $650K | $3,730 | 37.3% |
| $60K | $1,200 | $180K | $1,050 | 41.0% |
📉 Cash Flow Reality Check** (after-tax):
- Gross $85K → Net ~$5,000/mo
- PITI: $2,200
- Tax/Ins/Maint: $500
- Utilities/Car/Groceries: $1,800
- Discretionary: $500/mo** (tight but workable)
➡️ Standard DTI
“With $85K income and $500 debt, how much house can I buy?” — lender-focused.
➡️ Cash Flow
“After rent, food, and fun, how much can I *comfortably* spend on housing?” — budget-focused.
➡️ Stress Test
“If rates jump to 8.5% or I lose my job, can I still afford this house?” — resilience-focused.
Note: Uses 2025 median rates (6.8%), property tax by state, and 1% maintenance rule.