Hyper-Local Home Affordability AI
Most calculators just multiply your salary by 3. This algorithmic tool analyzes your specific Debt-to-Income ratio, local tax estimates, and closing costs to give you a definitive "Yes" or "No."
Your Financial Picture
Target Property & Local Market
Affordability Assessment
About hyper-local home affordability
Hyper-local home affordability checks if you can actually carry a specific home price in your specific market, given current 6.5 to 7 percent mortgage rates, your local property tax (which ranges from 0.3 percent in Hawaii to 2.5 percent in New Jersey), homeowners insurance, PMI, and the cash you have on hand for down payment plus closing.
How it works
The model runs two independent tests. Both must pass for the home to be affordable.
PITI Monthly = P&I + Property Tax/12 + Insurance/12 + PMI/12 Back-End DTI = (PITI + Other Monthly Debt) / Gross Monthly Income Cash Needed = Down Payment + Closing Costs + Reserves Affordable = (Back-End DTI <= 36 percent) AND (Cash on Hand >= Cash Needed)
- Front-end DTI: PITI / gross income. Lenders prefer 28 percent or less.
- Back-end DTI: (PITI + all debt) / gross income. Standard cap 36 percent, conforming up to 45 percent, FHA up to 50 percent with compensating factors.
- Property tax rate: assessed locally. National median is 1.07 percent of assessed value; Hawaii 0.27 percent, New Jersey 2.46 percent, Illinois 2.05 percent (Tax Foundation 2025).
- PMI: 0.5 to 1.5 percent of loan annually when down payment is less than 20 percent. Drops off automatically at 78 percent LTV under federal Homeowners Protection Act.
Worked example
A $120,000 gross household has $800 of monthly debt, $60,000 saved, and is targeting a $450,000 home in a 1.2 percent property tax market at 6.5 percent mortgage rate:
- Monthly gross income: $120,000 / 12 = $10,000.
- Maximum back-end DTI at 36 percent: $10,000 x 0.36 = $3,600.
- Maximum PITI: $3,600 - $800 other debt = $2,800.
- Down payment available: $60,000 - ($450,000 x 0.03 closing) - $5,000 buffer = $41,500. That is 9.2 percent down, below 20 percent, triggering PMI.
- Loan amount: $450,000 - $41,500 = $408,500.
- P&I at 6.5 percent for 30 years: $2,582.
- Property tax: $450,000 x 0.012 / 12 = $450.
- Insurance estimate: $450,000 x 0.0035 / 12 = $131.
- PMI: $408,500 x 0.0075 / 12 = $255.
- Total PITI: $2,582 + $450 + $131 + $255 = $3,418.
Property tax rates in major US states (2026)
| State | Effective rate | Annual tax on $450K home |
|---|---|---|
| Hawaii | 0.27 percent | $1,215 |
| Colorado | 0.51 percent | $2,295 |
| California | 0.71 percent (Prop 13 cap) | $3,195 |
| Florida | 0.86 percent | $3,870 |
| Texas | 1.74 percent | $7,830 |
| Illinois | 2.05 percent | $9,225 |
| New Jersey | 2.46 percent | $11,070 |
Common mistakes
- Using the old 3x salary rule. At 3 percent mortgage rates (2021), 3x salary worked. At 6.5 to 7 percent (2026), it overstates affordability by 35 to 45 percent.
- Forgetting hyper-local property tax. The same $450,000 house costs $4,000 per year in California and $11,000 in New Jersey. That is $580 per month of DTI difference.
- Confusing pre-approval with affordability. Lenders pre-approve up to 43 to 50 percent DTI under conforming or FHA. Living at that level leaves zero room for childcare, retirement savings, or car repair.
- Skipping reserve requirements. Lenders typically want 2 to 6 months of PITI in liquid reserves after closing. Conventional loans on a second home or jumbo can require 6 to 12 months.
- Treating PMI as forever. PMI drops automatically at 78 percent LTV. You can also request cancellation at 80 percent LTV. On a 5 percent down loan, you often hit the threshold in 8 to 10 years through pure amortization.
- Ignoring HOA dues. Condos and HOAs add $200 to $800 per month. Lenders count this toward back-end DTI even though you cannot itemize or deduct it.
Related tools and glossary
Frequently asked questions
What is PMI?
Private Mortgage Insurance. If you put down less than 20 percent on a conventional loan, lenders require a monthly insurance premium that protects the lender (not you) in case of default. It typically costs 0.5 to 1.5 percent of the loan annually. PMI must be cancelled automatically when LTV reaches 78 percent under the federal Homeowners Protection Act.
Should I put down 20 or 5 percent?
20 percent avoids PMI and lowers the payment. If putting 20 percent down drains the entire emergency fund, 5 to 10 percent down with cash preserved is safer. Houses break in unpredictable ways; a $12,000 HVAC failure plus a $9,000 roof leak in year 2 has bankrupted many over-extended buyers.
What is the difference between front-end and back-end DTI?
Front-end DTI is housing only (PITI) divided by gross income, target 28 percent or less. Back-end DTI adds all other monthly debts (car loans, student loans, minimum credit card payments) and aims for 36 percent or less under standard guidelines, up to 50 percent with FHA and compensating factors.
How much cash do I really need at closing?
Down payment plus 2 to 5 percent in closing costs (title, origination, appraisal, escrow setup) plus 2 to 6 months of PITI as reserves. On a $450,000 home that totals roughly $80,000 to $120,000 for a 20 percent down scenario.
Sources
- Freddie Mac (2026) Primary Mortgage Market Survey.
- Tax Foundation (2025) Property Taxes Paid as a Percentage of Owner-Occupied Housing Value.
- Fannie Mae (2025) Selling Guide B3-6: Loan-to-Value Ratios and Underwriting Limits.
- CFPB (2024) Homeowners Protection Act PMI Cancellation Requirements.