1. What is the House Affordability Calculator?

The House Affordability Calculator helps you determine how much house you can afford based on your income, debt, and current mortgage rates. It follows the standard affordability formula used by lenders like Zillow.

2. How Does the Calculator Work?

The calculator uses two main formulas:

Where:

• \( Income \) — Your annual gross income
• \( Debt \) — Your annual debt payments
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The calculator first determines your annual affordability, then calculates the maximum mortgage amount you could qualify for based on current rates and terms.

3. Importance of Affordability Calculation

Details: Knowing your home affordability helps you shop within your budget, get pre-approved for mortgages, and avoid financial stress. Lenders typically recommend spending no more than 28-36% of your gross income on housing.

4. Using the Calculator

Tips: Enter your gross annual income (before taxes), all annual debt payments (car loans, student loans, credit cards), select mortgage term and current interest rate. The calculator will show what price home you can afford.

5. Frequently Asked Questions (FAQ)

Q1: What's the 28/36 rule?
A: A common guideline where no more than 28% of gross income goes to housing expenses, and no more than 36% to total debt.

Q2: Should I include taxes and insurance?
A: This calculator focuses on principal and interest. For a complete picture, add ~1-2% of home value annually for taxes and insurance.

Q3: How does credit score affect affordability?
A: Higher scores typically qualify for lower interest rates, increasing your purchasing power.

Q4: What about down payments?
A: This calculates mortgage amount. Subtract your down payment to determine home price you can afford.

Q5: How accurate is this calculator?
A: It provides a good estimate, but actual loan amounts depend on lender policies, credit history, and other factors.