Home price by interest rate and monthly debts
Each cell is the highest price whose full monthly payment fits both ratios on $40,000 a year with 10% down. Monthly debts are payments on car loans, student loans and cards.
| Rate | No debts | $150/mo debts | $300/mo debts |
|---|---|---|---|
| 5.5% | $122,362 | $122,362 | $117,155 |
| 6.5% | $112,221 | $112,221 | $107,446 |
| 7.5% | $103,279 | $103,279 | $98,885 |
At 6.5% with no other debts the housing ratio is the binding limit and the price is about 2.8 times income. Add $150 of monthly debts and the housing ratio still binds and the price becomes $112,221. A one-point change in rate moves the price by roughly $9,541 at this income.
Home price by down payment (6.5%, $150/mo debts)
| Down payment | Cash down | Home price | PMI / month |
|---|---|---|---|
| 3.5% | $3,696 | $105,596 | $42 |
| 5% | $5,353 | $107,054 | $42 |
| 10% | $11,222 | $112,221 | $42 |
| 20% | $26,228 | $131,141 | $0 |
Reaching 20% down removes private mortgage insurance, which is why the jump from 10% to 20% is larger than the extra cash alone would suggest: the PMI money goes back into the principal-and-interest budget.
How the $112,221 figure is built
Start from gross monthly income of $3,333. The 28% housing limit is $933; the 36% total-debt limit is $1,200, less any other debts. With no debts, the housing limit is lower, so it sets the budget. At a price of $112,221 with $11,222 down, the loan is $100,999. Principal and interest at 6.5% over 30 years come to $638 a month, property tax $103, insurance $150 and PMI $42, for a total of $933, right at the limit.
A 15-year loan at the same rate supports about $85,782, because the same budget has to repay principal twice as fast; it builds equity much sooner and costs far less interest over the life of the loan. See 15-year vs 30-year mortgages.
Comparing nearby incomes
- $40k a year: about $112,221.
- $50k a year: about $145,648.
Before you shop at this price
The ratios describe what a lender may approve, not what feels comfortable. They use gross pay and ignore retirement saving, childcare and commuting. Many buyers aim below the 28% line to keep room for repairs, which often run around 1% of a home's value a year. Check the payment on a specific listing with the mortgage calculator, weigh buying against renting with the rent vs buy calculator, and read the 28/36 rule guide for how lenders apply the ratios.