1. What is Mortgage Affordability?

Mortgage affordability is the maximum amount you can borrow for a home loan based on your income, existing debts, and debt-to-income ratio. It helps determine how much house you can realistically afford.

2. How Does the Calculator Work?

The calculator uses the mortgage affordability formula:

Where:

• \( Income \) — Your annual or monthly income ($)
• \( DTI \) — Debt-to-income ratio (as decimal, e.g., 0.43 for 43%)
• \( Debt \) — Your existing monthly debt obligations ($)

Explanation: The equation calculates how much of your income can be allocated to a mortgage payment after accounting for existing debts.

3. Importance of Affordability Calculation

Details: Calculating mortgage affordability helps prevent overborrowing, ensures comfortable monthly payments, and improves loan approval chances.

4. Using the Calculator

Tips: Enter your income in dollars, DTI as decimal (e.g., 0.43 for 43%), and existing debt in dollars. All values must be valid (income > 0, DTI between 0-1, debt ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Most lenders prefer DTI below 43%, with 36% or lower being ideal for conventional loans.

Q2: Should I use gross or net income?
A: Lenders typically use gross income, but for personal budgeting, net income may give a more realistic picture.

Q3: What debts should be included?
A: Include all recurring monthly debts: car loans, student loans, credit card minimums, alimony, etc.

Q4: How does this differ from pre-approval?
A: This is an estimate. Actual pre-approval considers credit score, down payment, and lender-specific criteria.

Q5: What other factors affect affordability?
A: Consider property taxes, insurance, maintenance costs, and potential interest rate changes.