Affordability Formula Explained
The math behind the Affordability Calculator: the equation, the variables, and the assumptions it makes.
By Onias Derilus, Mortgage Capital · NMLS# 1859012 · Last Updated: June 2026
It estimates the home price you can realistically afford based on your income, monthly debts, down payment, and a target debt-to-income ratio.
The Formula
Max P&I = (Income/12 × DTI) − existing debts − taxes − insurance
Lenders cap your total monthly obligations at a percentage of gross monthly income — commonly around 43% to 50% depending on the loan program. That ceiling, minus your current debts and the housing escrow, leaves the budget available for principal and interest.
The calculator then reverses the amortization formula to turn that monthly principal-and-interest budget into a loan amount, and adds your down payment to estimate the price you can support.
Turn Your Affordability Estimate Into a Real Pre-Approval
Get a personalized rate quote from a licensed Florida mortgage broker — no obligation. NMLS# 1859012.
Rates are illustrative only. APR and payments vary by credit score, loan amount, and market conditions. Subject to credit approval. Not a commitment to lend. NMLS# 1859012. Equal Housing Lender.