Mortgage Affordability Formula
The Mortgage Affordability Formula helps you estimate the maximum home price you can comfortably afford by balancing your monthly housing budget against the typical costs of homeownership in your desired market.
Formula
Copy the exact expression or work through it step by step below.
Affordable Home Price = Maximum Monthly Housing Cost / Ownership Cost Ratio Variables
AHP
Affordable Home Price
The cost-side input that anchors the mortgage affordability math.
MMHC
Maximum Monthly Housing Cost
The cost-side input that anchors the mortgage affordability math.
OCR
Ownership Cost Ratio
The cost-side input that anchors the mortgage affordability math.
Step By Step
- 1
Set the baseline case with the real calculator inputs.
Annual Income = $140,000, Down Payment = $90,000, Monthly Debt Payments = $700, Max Dti Percent = 43.0%
- 2
Translate rates, periods, and cash values onto the same footing before combining them.
Keep the mortgage affordability assumptions consistent instead of mixing monthly and annual views.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
The calculator lands with maximum monthly housing budget at $4,317 and comfortable monthly housing budget at $3,733.
- 4
Run one changed scenario so the formula is stress-tested before it is trusted.
The mortgage affordability calculator page is the fastest way to compare that second case.
Worked Example
Mortgage Affordability sample case
Annual Income
$140,000
Down Payment
$90,000
Monthly Debt Payments
$700
Max Dti Percent
43.0%
Affordable Home Price = Maximum Monthly Housing Cost / Ownership Cost Ratio using annual income $140,000, down payment $90,000, monthly debt payments $700, max dti percent 43.0%.
The calculator lands with maximum monthly housing budget at $4,317 and comfortable monthly housing budget at $3,733.
Common Variations
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Sources & References
- Understanding Your Debt-to-Income Ratio — Consumer Financial Protection Bureau (CFPB)
- How Much House Can I Afford? — NerdWallet
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