Home Affordability Calculator

The calculator uses the standard debt-to-income (DTI) ratio that lenders apply when qualifying borrowers. It takes your gross monthly income, multiplies it by the maximum DTI ratio (43% for most loan programs), then subtracts your existing monthly debt payments. The remaining amount is your maximum allowable monthly housing payment. From there, it works backward — factoring in the interest rate, loan term, property taxes, insurance, PMI (if applicable), and HOA fees — to determine the highest purchase price that keeps your total housing cost within that limit.

DTI stands for debt-to-income ratio — the percentage of your gross monthly income that goes toward debt payments. Lenders use two DTI measurements: the front-end ratio (housing costs only, typically capped at 28–31%) and the back-end ratio (all debts including housing, capped at 43–50%). The 43% back-end limit is the threshold for Qualified Mortgages under federal rules. Some loan programs allow up to 50% with compensating factors like strong reserves or excellent credit. This calculator shows both a "comfortable" level at 36% and the maximum at 43% so you can see the range.

Private Mortgage Insurance (PMI) is required on conventional loans when your down payment is less than 20% of the purchase price. PMI typically costs between 0.5% and 1.0% of the loan amount annually, depending on your credit score and LTV ratio. On a $400,000 loan, that translates to $167 to $333 per month. The good news: PMI is not permanent. It automatically cancels when your loan balance reaches 78% of the original purchase price, and you can request removal at 80%. Colorado's strong home appreciation often accelerates the timeline to PMI removal.

Colorado has some of the lowest effective property tax rates in the nation — approximately 0.55% on average, compared to the national average of around 1.1%. This is largely due to the Gallagher Amendment (repealed in 2020 but with lasting effects) and the TABOR amendment, which limits how much property tax revenue can grow. For home buyers, this means property taxes add less to your monthly payment than in most other states. On a $550,000 home, Colorado property taxes run roughly $252 per month versus $504 in an average-tax state.

Your down payment can come from savings, gift funds, the sale of a current home, or a HELOC on an existing property. Gift funds are accepted by FHA, VA, and conventional loans — FHA and VA allow 100% of the down payment to come from a gift. If you are using a HELOC on a current home, the new monthly payment on that HELOC counts toward your debt-to-income ratio. CO Home Equity helps you structure the optimal down payment strategy based on your specific financial situation.