1. What is Home Purchase Affordability?

Home Purchase Affordability measures how much money you have available for purchasing a home after accounting for your existing debts. It's a simple but important indicator of your financial capacity for home ownership.

2. How Does the Calculator Work?

The calculator uses the basic affordability formula:

Where:

• \( Income \) — Your total annual income
• \( Debt \) — Your total annual debt payments

Explanation: This simple calculation shows how much of your income remains after paying existing debts, which can be used for mortgage payments.

3. Importance of Affordability Calculation

Details: Understanding your home purchase affordability helps prevent over-borrowing and ensures you can comfortably manage mortgage payments along with other financial obligations.

4. Using the Calculator

Tips: Enter your total annual income and total annual debt payments in dollars. The calculator will show how much you can potentially allocate toward home purchase.

5. Frequently Asked Questions (FAQ)

Q1: Should I include all income sources?
A: Yes, include all reliable sources of income including salary, bonuses, investments, and other regular income.

Q2: What debts should I include?
A: Include all recurring debt payments like credit cards, car loans, student loans, and other personal loans.

Q3: Is this the only factor in home affordability?
A: No, lenders also consider credit score, down payment, interest rates, and debt-to-income ratio.

Q4: What's a good affordability amount?
A: Generally, your total housing costs shouldn't exceed 28-35% of your gross monthly income.

Q5: Should I consult a financial advisor?
A: For major purchases like a home, consulting with a financial professional is always recommended.