1. What is the Home Affordability Calculator?

The Home Affordability Calculator estimates how much house you can afford based on your income and debt-to-income ratio (DTI). This follows Zillow's approach to determining home buying power.

2. How Does the Calculator Work?

The calculator uses the affordability formula:

Where:

• \( Income \) — Your annual gross income
• \( DTI \) — Debt-to-Income ratio (typically 0.36 for conventional loans)

Explanation: The calculation shows the maximum annual housing payment you can afford based on standard lending guidelines.

3. Importance of Affordability Calculation

Details: Knowing your affordable price range helps you shop for homes within your budget and get pre-approved for the right mortgage amount.

4. Using the Calculator

Tips: Enter your annual income before taxes and your target DTI ratio (standard is 0.36). The calculator will show your estimated affordable home price.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Most lenders prefer a DTI below 0.36 (36%), with no more than 0.28 (28%) going toward housing expenses.

Q2: Does this include property taxes and insurance?
A: The basic calculation doesn't, but lenders will include these in your final DTI calculation.

Q3: How accurate is this estimate?
A: This provides a general guideline. Actual approval amounts depend on credit score, down payment, and other factors.

Q4: Should I use gross or net income?
A: Lenders use gross income (before taxes) for qualification calculations.

Q5: How can I improve my affordability?
A: Increase income, reduce debts, save for larger down payment, or improve credit score for better rates.