1. What is House Affordability?

House affordability refers to the maximum price of a home you can purchase based on your income, debts, and current interest rates. It helps determine a realistic budget when shopping for a home.

2. How Does the Calculator Work?

The calculator uses the standard affordability formula:

Where:

• \( Annual Income \) — Your gross yearly income
• \( Debt-to-Income Ratio \) — Percentage of income allocated to housing (typically 28%)
• \( Annual Debt \) — Your existing yearly debt payments
• \( Interest Rate \) — Mortgage interest rate
• \( Loan Term \) — Duration of mortgage in years

Explanation: The equation calculates the present value of all mortgage payments you can afford based on your financial situation.

3. Importance of Affordability Calculation

Details: Calculating affordability prevents overborrowing, ensures comfortable monthly payments, and helps maintain financial stability after home purchase.

4. Using the Calculator

Tips: Enter your annual gross income, select a conservative debt-to-income ratio (28% is standard), include all existing debts, and use current market interest rates.

5. Frequently Asked Questions (FAQ)

Q1: What is a good debt-to-income ratio?
A: Most lenders recommend keeping housing costs below 28% of gross income and total debt below 36%.

Q2: Should I include taxes and insurance?
A: This calculator shows principal and interest only. Add 1-2% of home value yearly for taxes and insurance.

Q3: How does down payment affect affordability?
A: This calculates total home price. Your loan amount would be purchase price minus down payment.

Q4: What if I have variable income?
A: Use a conservative income estimate based on several years of earnings history.

Q5: How often should I recalculate?
A: Recalculate whenever your income changes significantly, interest rates move, or you take on new debt.