1. What is the House Affordability Calculator?

The House Affordability Calculator helps determine how much house you can afford based on your income, debts, and current mortgage rates. It uses standard lending criteria to estimate a comfortable home price range.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Annual\ Income \) — Your gross yearly income
• \( Debt\-to\-Income\ Ratio \) — Lender's maximum allowed ratio (typically 36%)
• \( Annual\ Debt\ Payments \) — Your existing debt obligations
• \( Mortgage\ Rate\ Factor \) — Calculated from interest rate and loan term

Explanation: The calculator determines how much you can borrow while maintaining a healthy debt-to-income ratio.

3. Importance of Affordability Calculation

Details: Calculating home affordability helps prevent overextension, ensures comfortable mortgage payments, and aligns with lender requirements for mortgage approval.

4. Using the Calculator

Tips: Enter your gross annual income, select a conservative debt-to-income ratio (36% is standard), include all existing debt payments, and use current market interest rates.

5. Frequently Asked Questions (FAQ)

Q1: What debt-to-income ratio should I use?
A: Most lenders use 36% as the maximum, but conservative buyers may use 28% for more financial flexibility.

Q2: Should I include taxes and insurance?
A: This calculator focuses on principal and interest. For a complete picture, add about 1.25% of home value annually for taxes and insurance.

Q3: How does credit score affect affordability?
A: Higher scores qualify for better rates, increasing affordability. Poor credit may reduce the amount you can borrow.

Q4: What about down payment?
A: This calculates total home price. Subtract your down payment to determine the mortgage amount needed.

Q5: Are there other costs to consider?
A: Yes, factor in closing costs (2-5% of home price), moving expenses, and immediate home maintenance needs.