House Affordability Calculator

Determine how much house you can afford based on your income, existing debts, and financial situation. This calculator uses industry-standard debt-to-income ratios and factors in all homeownership costs.

How It Works

The calculator uses two key ratios recommended by mortgage lenders:

• Front-end ratio (28%): Your total housing costs should not exceed 28% of your gross monthly income
• Back-end ratio (36%): Your total monthly debt payments (including housing) should not exceed 36% of your gross monthly income

What's Included in the Calculation

Housing Costs

• Principal and interest payments
• Property taxes
• Home insurance
• Private Mortgage Insurance (PMI) if down payment is less than 20%
• HOA fees (if applicable)

Factors That Affect Affordability

• Credit Score: Higher scores can qualify you for better rates and higher loan amounts
• Down Payment: Larger down payments reduce loan amount and eliminate PMI
• Existing Debts: Car loans, credit cards, and student loans reduce available income for housing
• Interest Rates: Current mortgage rates significantly impact affordability

Tips for Increasing Affordability

1. Improve Your Credit Score

   • Pay bills on time
   • Reduce credit card balances
   • Don't close old credit accounts

2. Save for a Larger Down Payment

   • Reduces loan amount
   • Eliminates PMI if 20% or more
   • Shows financial discipline to lenders

3. Pay Down Existing Debt

   • Improves debt-to-income ratio
   • Frees up monthly income for housing costs

4. Consider Different Loan Terms

   • 15-year loans have higher monthly payments but less total interest
   • 30-year loans have lower monthly payments but more total interest

Understanding the Results

• Maximum Home Price: The estimated maximum purchase price you can afford
• Housing Ratio: Percentage of income going to housing costs (aim for ≤28%)
• Total Debt Ratio: Percentage of income going to all debts (aim for ≤36%)
• Remaining Income: Money left after housing and debt payments for other expenses

Important Considerations

This calculator provides estimates based on traditional lending guidelines. Actual loan approval depends on many factors including:

• Employment history
• Credit history details
• Debt verification
• Property appraisal
• Loan type and program requirements

Always consult with a qualified mortgage professional for personalized advice and actual loan terms.

Frequently Asked Questions

Q: Should I use the maximum amount the calculator suggests? A: Not necessarily. Consider your lifestyle, future goals, and potential income changes. Many financial experts recommend staying well below the maximum to maintain financial flexibility.

Q: How accurate is this calculator? A: This calculator provides good estimates based on standard lending criteria. However, each lender may have different requirements, and your specific situation may warrant different terms.

Q: What if I'm self-employed? A: Self-employed borrowers often need to provide additional documentation and may face stricter income verification requirements. Consider using conservative income figures and consult with lenders experienced in self-employed loans.