How to work out what house you can afford from a monthly payment
Most people do not start with an income ratio. They start with a number they know they can pay each month, such as "$2,000 a month for the house". This calculator turns that into a price. It treats your budget as the total housing cost, takes out insurance and HOA dues, and then finds the home price where the loan payment, property tax and, when needed, mortgage insurance use up exactly what is left.
Property tax makes this a little tricky, because it depends on the price you are trying to find. The calculator solves it exactly instead of guessing. The result is the same as running the mortgage calculator at that price, which our tests confirm.
The formula, and what every variable means
budget for loan, tax and PMI = monthly budget − insurance − HOA
price = (budget + (f + q) × down payment) ÷ (f + q + t)
| Symbol | Meaning | How it is found |
|---|---|---|
| Monthly budget | The total you will spend on housing each month | Entered directly |
| f | Monthly loan payment per $1 borrowed | r ÷ (1 − (1 + r)−n), where r is the monthly rate and n the number of payments |
| q | Monthly PMI per $1 borrowed | Annual PMI rate ÷ 12. It is zero when the down payment is 20% or more. |
| t | Monthly property tax per $1 of price | Annual tax rate ÷ 12 |
| Down payment | Cash you put down | Entered directly |
The second line comes from the fact that the budget must cover the loan payment, the PMI and the tax: budget = (f + q) × (price − down payment) + t × price. Solving for the price gives the formula above.
Worked example 1, by hand: $2,000 a month
A $2,000 monthly budget, $40,000 down, a 6.5% rate on a 30-year loan, 1.1% property tax, $1,800 a year of insurance and 0.7% PMI.
- Insurance per month: $1,800 ÷ 12 = $150.00.
- Budget left for loan, tax and PMI: $2,000 − $150.00 = $1,850.00.
- Loan factor f = 0.006321, PMI factor q = 0.7 ÷ 100 ÷ 12 = 0.000583 and tax factor t = 1.1 ÷ 100 ÷ 12 = 0.000917.
- Price = ($1,850.00 + (0.006321 + 0.000583) × $40,000) ÷ (0.006321 + 0.000583 + 0.000917) ≈ $271,864.
That is a loan of $231,864, or 85% of the price. Because that is more than 80%, PMI applies, which is why the PMI factor was included. Run forwards, the month costs $1,465.54 for principal and interest, $249.21 for property tax, $150.00 for insurance and $135.25 for PMI, which adds up to $2,000.00.
Worked example 2: how the down payment changes the answer
The same $2,000 budget with four different down payments:
| Down payment | Home price | Down as % of price | PMI per month |
|---|---|---|---|
| $20,000 | $254,208 | 8% | $136.62 |
| $40,000 | $271,864 | 15% | $135.25 |
| $80,000 | $325,486 | 25% | None |
| $120,000 | $360,420 | 33% | None |
With $40,000 down, PMI takes $135 of the budget every month. At $80,000 down, the down payment is about 25% of the price and the PMI disappears, so the same budget reaches a home that costs $53,622 more. Getting to 20% down can be worth far more than the cash itself.
Worked example 3: the interest rate
| Interest rate | Home price | Loan amount |
|---|---|---|
| 5.5% | $292,628 | $252,628 |
| 6.5% | $271,864 | $231,864 |
| 7.5% | $253,531 | $213,531 |
| 8.5% | $237,335 | $197,335 |
The payment you can afford is fixed, so every extra point of interest shrinks the loan it can carry. Between 5.5% and 8.5% the reachable price falls by $55,293. Try your own figure a point or two above today's quote as a stress test.
Worked example 4: the same budget in two different places
Property tax, insurance and HOA dues vary widely from place to place. Take the same $2,000 budget, $40,000 down and 6.5% rate, in two different areas:
| Low-cost area | High-cost area | |
|---|---|---|
| Property tax rate | 0.6% | 2.0% |
| Insurance per year | $1,200 | $2,800 |
| HOA per month | $0 | $300 |
| Home price your budget supports | $293,916 | $203,348 |
The same monthly check buys $90,569 more house in the low-cost area. When you compare places or listings, compare the all-in monthly cost, not only the price.
What income does this budget imply?
A traditional rule of thumb keeps housing costs under about 28% of gross income and total debts under about 36%. The 36% total matches the maximum debt-to-income ratio in the Fannie Mae Selling Guide for manually underwritten loans; the 28% housing share is a convention, not an official rule. A $2,000 monthly housing cost is 28% of an income of about $85,714 a year ($2,000 × 12 ÷ 0.28). Your other debts and credit score matter too. The house affordability calculator starts from your income and shows the price from the lender's side. Compare the two answers and be careful with the higher one.
Common mistakes to avoid
- Calling the mortgage payment the budget. Tax, insurance, HOA and PMI come on top of it.
- Guessing the property tax. Use the actual rate for the area. It can change the price by tens of thousands.
- Forgetting the cash needed to close. Closing costs, moving and repairs are outside the monthly figure.
- Using the maximum. The result is a ceiling. A little room each month is what makes a house comfortable.
- Ignoring the rate. As example 3 shows, a point or two changes the price a lot.
Once you have a price in mind, test it in the mortgage calculator and compare shorter and longer loans with the 15 vs 30 year mortgage calculator.
Sources and review
The formulas are the standard fixed-rate loan payment formula solved for the price, with property tax that grows with the price and PMI charged while the loan is above 80% of the price. The results are checked against the mortgage calculator in our test suite. The Consumer Financial Protection Bureau explains what PITI is, how mortgage insurance works (typically needed with a down payment under 20% of the price) and removing PMI. For the debt-to-income limits lenders use, see the Fannie Mae Selling Guide (section B3-6-02). For more buyer guidance see the CFPB's Owning a Home tools. Last reviewed September 2026. Then follow the steps in the first-time home buyer guide. Read about our methodology.