What the inputs mean
Gross annual income is divided by twelve. Other monthly debts are subtracted from the chosen total debt-to-income target. Property taxes and homeowners insurance are divided by twelve, and PMI is entered manually because its price depends on the actual loan and borrower.
What the formula does
For a positive annual interest rate, the monthly principal-and-interest payment factor is r / (1 − (1 + r)−n), where r is the monthly rate and n is the total number of monthly payments. The affordable loan amount equals the available principal-and-interest budget divided by that factor. When the rate is zero, the factor is 1 / n.
Costs not automatically included
- Homeowners association dues or special assessments.
- Utilities, maintenance, repairs, or capital improvements.
- Closing costs, prepaid items, moving, or furniture.
- Changes in property taxes, insurance premiums, or income.
For a broader explanation, read Home Affordability and Mortgage Qualification. The CFPB DTI guide explains the basic ratio.
The output is an educational budgeting estimate only. It does not determine eligibility, underwriting, or the maximum loan offered by a lender.