How to Use Our Home Affordability Calculator

3 min read

How to Use Our Home Affordability Calculator

Before you start house hunting, you need to know your budget. Our Home Affordability Calculator tells you the maximum home price you can comfortably afford.

What to Enter

• Annual Household Income -- Your gross (pre-tax) annual income. If you are buying with a partner, combine both incomes.
• Monthly Debts -- Total monthly debt payments: car loans, student loans, credit card minimums, and any other recurring obligations.
• Down Payment -- The cash you have available for a down payment. More is better -- 20% avoids PMI.
• Interest Rate -- The current mortgage rate you expect to get.
• Loan Term -- 15 or 30 years.
• Property Tax Rate -- Varies by location, typically 0.5-2.5% of home value annually.

How It Calculates

The calculator uses two standard lending ratios:

Front-End Ratio (28%) -- Your total housing costs (mortgage, taxes, insurance) should not exceed 28% of your gross monthly income.

Back-End Ratio (36%) -- Your total housing costs plus all other debts should not exceed 36% of your gross monthly income.

The calculator takes the lower of the two limits to give you a conservative, comfortable maximum home price.

What the Results Mean

Maximum Home Price -- The most expensive home you can afford while staying within lending guidelines.

Monthly Payment -- Your estimated total monthly housing cost including principal, interest, taxes, and insurance.

Important: Just because you can qualify for a certain amount does not mean you should borrow it. Many financial advisors recommend keeping housing costs at 25% or less of take-home pay for financial comfort.

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