House Affordability Calculator

Determine how much house you can afford based on your income, debts, and other financial factors. Our calculator helps you find a home price that fits your budget.

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What is House Affordability?

House affordability is a measure of how much home you can reasonably afford based on your income, existing debts, down payment, and other financial factors. It helps you set realistic expectations for your home search and avoid overextending yourself financially.

Mortgage lenders typically use debt-to-income (DTI) ratio as a key metric to determine how much they're willing to lend. DTI represents the percentage of your gross monthly income that goes toward paying debts, including your potential mortgage payment.

How House Affordability is Calculated

The house affordability calculation is based on your debt-to-income ratio (DTI) and the mortgage payment formula:

$$DTI = \frac{\text{Monthly Debt Payments}}{\text{Gross Monthly Income}}$$
$$Max\,Home\,Price = \frac{(Income \times DTI\,Limit - Monthly\,Debts) \times 12}{Interest\,Rate} \times \left(1-\frac{1}{(1+\frac{Interest\,Rate}{12})^{Term \times 12}}\right)$$
  • DTI = Debt-to-Income Ratio, the percentage of your gross monthly income used for debt payments
  • Income = Your gross monthly income before taxes
  • Monthly Debts = Your existing monthly debt payments (credit cards, car loans, student loans, etc.)
  • Interest Rate = Annual interest rate on your mortgage
  • Term = Loan term in years (typically 15 or 30 years)
  • Down Payment = Amount you plan to pay upfront (typically 3% to 20% of the home price)

Factors Affecting House Affordability

Income

Your gross annual income is the starting point for determining affordability. Higher income generally means you can afford a more expensive home, as lenders will approve a larger loan amount.

Existing Debts

Your current debt obligations, such as credit card payments, car loans, and student loans, reduce the amount you can allocate toward a mortgage payment, thereby lowering your home affordability.

Credit Score

A higher credit score typically qualifies you for better interest rates, which increases your purchasing power. Lenders use your credit score to assess risk and determine loan eligibility.

Down Payment

A larger down payment reduces the amount you need to borrow, potentially allowing you to afford a more expensive home. It may also eliminate the need for private mortgage insurance (PMI).

How to Use This Calculator

  1. Enter your annual income before taxes.
  2. Input your current monthly debt payments (credit cards, car loans, student loans, etc.).
  3. Specify your down payment amount or percentage and adjust other parameters as needed.
  4. Review the results to see the maximum home price you can afford and the breakdown of your monthly payments.

Important Notes

This calculator provides estimates only. Actual loan approval and amounts will depend on your specific financial situation, credit history, and lender requirements.

  • This calculator doesn't account for property taxes, home insurance, or homeowners association (HOA) fees, which can significantly impact affordability.
  • Housing market conditions, such as home prices and availability, may affect your ability to find a suitable home within your budget.
  • Consider consulting with a mortgage professional for personalized advice based on your specific financial situation.