1. What is the Home Affordability Calculator?

The Home Affordability Calculator helps determine how much house you can afford based on your monthly income, current interest rates, and loan terms. It uses the standard 28% debt-to-income ratio guideline to ensure manageable mortgage payments.

2. How Does the Calculator Work?

The calculator uses the affordability formula:

Where:

• \( \text{Monthly Income} \) — Your gross monthly income
• \( 28\% \) — Standard debt-to-income ratio for housing expenses
• \( \text{Mortgage Rate Factor} \) — Monthly payment factor based on interest rate and loan term
• The factor is calculated using the mortgage payment formula for the given interest rate and term

Explanation: The calculation ensures your monthly mortgage payment doesn't exceed 28% of your gross monthly income, following standard lending guidelines.

3. Importance of Home Affordability Calculation

Details: Proper home affordability assessment prevents over-leveraging, ensures comfortable monthly payments, and helps maintain financial stability while building equity.

4. Using the Calculator

Tips: Enter your gross monthly income before taxes, current mortgage interest rate, and preferred loan term. Use realistic numbers for accurate results and consider additional homeownership costs.

5. Frequently Asked Questions (FAQ)

Q1: Why use 28% as the debt-to-income ratio?
A: 28% is the standard guideline used by most lenders to ensure housing costs remain manageable alongside other financial obligations.

Q2: What's included in the 28% calculation?
A: This typically includes principal, interest, property taxes, and homeowners insurance (PITI).

Q3: Should I consider other debts?
A: Yes, total debt-to-income ratio (including other debts) should generally not exceed 36-43% of your gross income.

Q4: How does down payment affect affordability?
A: This calculator shows the total home price you can afford. Your actual purchase price will depend on your available down payment.

Q5: Are there other costs to consider?
A: Yes, factor in maintenance (1-2% of home value annually), utilities, HOA fees, and potential repairs when budgeting.