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Financial Glossary
Mortgage affordability refers to how much home you can reasonably purchase based on your income, existing debts, down payment, and current interest rates. Lenders use the 28/36 rule: no more than 28% of gross monthly income for housing costs and no more than 36% for total debt payments. Your credit score and employment history also affect affordability.
Mortgage affordability is determined by multiple factors that lenders weigh together. Your debt-to-income ratio is the primary metric, but lenders also consider your credit score (minimum 620 for conventional loans, 580 for FHA), employment history (typically 2+ years stable), down payment size (affects PMI requirements), and cash reserves (typically 2-6 months of payments). The affordable price is not just what a lender will approve — it is what you can comfortably afford given your lifestyle, other financial goals, and risk tolerance. A common mistake is buying at the maximum approval amount, leaving no room for savings, travel, or unexpected expenses. Most financial advisors recommend buying below your maximum approved amount.
Your salary determines your borrowing power more than any other factor. A general guideline: you can typically afford a home worth 3-5 times your annual income depending on interest rates and down payment. At a $75,000 salary with 20% down and 6.5% rates, you might afford $350,000-$400,000 (4.7-5.3x salary). At a $150,000 salary, the range increases to $700,000-$800,000. However, higher earners in high-cost areas may need to stretch beyond traditional guidelines. Our mortgage calculator shows how different salaries, down payments, and rates affect your affordable home price range.
With a $75,000 annual salary ($6,250/month), no other debts, and a 20% down payment, you can afford approximately $2,500 monthly housing costs. At current interest rates, this translates to a home price of roughly $350,000-$400,000 depending on property taxes and insurance.
With a $75,000 salary, zero debt, and 20% down, you can typically afford a home between $350,000 and $400,000. Your actual affordable price depends on interest rates, property taxes, insurance, and HOA fees. Use our mortgage calculator for a personalized estimate.
The 28/36 rule states that no more than 28% of your gross monthly income should go to housing costs, and no more than 36% should go to total debt payments including housing. This is a guideline lenders use to determine mortgage approval and affordable loan amounts.
A larger down payment reduces your loan amount and monthly payment, and eliminates PMI at 20% down. A 10% down payment on a $400,000 home adds roughly $200-300 monthly for PMI compared to 20% down. Our calculator helps compare different down payment scenarios to find the optimal balance.
Interest rates have a dramatic effect on affordability. A 1% rate increase on a $300,000 loan adds approximately $170 to your monthly payment. At 6% vs 7%, the difference on a $400,000 home is about $250 per month, which equates to roughly $40,000 in purchasing power.
Yes. HOA fees can range from $100-$1,000+ monthly and count toward your housing cost. Include them in your monthly housing budget when calculating affordability. Our mortgage calculator includes an HOA field to ensure your estimate is accurate.
Australia calculators use data from the following official government agencies:
Our Australian calculators follow tax rates, thresholds, and superannuation rules published by the Australian Taxation Office (ATO). Wage and economic data is sourced from the Australian Bureau of Statistics (ABS). Mortgage rates reflect RBA cash rate influences and market averages. All figures are for educational purposes.
All tax brackets, contribution rates, and economic data used in our calculators are sourced from the official government publications listed above. Rates are updated at least annually to reflect the latest tax year and regulatory changes. Users should verify critical figures with official sources or qualified professionals.
Last updated: June 2026. Information may change; always verify with official sources.
Last Updated: July 2026 — Reviewed Against Official Sources
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