Zillow Home Affordability Calculator

Home Affordability Formula:

\[ \text{Affordable Home Price} = \frac{\text{Annual Income} \times \text{Debt-to-Income Ratio}}{12 \times \text{Monthly Debt Payments}} \]

Annual Income:

Debt-to-Income Ratio (%):

Monthly Debt Payments:

Interest Rate (%):

Loan Term:

Affordable Home Price:

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1. What is the Home Affordability Calculator?

The Zillow Home Affordability Calculator helps determine how much house you can afford based on your income, debts, and current mortgage rates. It follows standard lending guidelines to estimate your maximum home price.

2. How Does the Calculator Work?

The calculator uses standard affordability formulas:

\[ \text{Maximum Monthly Payment} = \left(\frac{\text{Annual Income} \times \text{DTI Ratio}}{12}\right) - \text{Monthly Debts} \] \[ \text{Loan Amount} = \text{Payment} \times \frac{1 - (1 + r)^{-n}}{r} \]

Where:

\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Total number of payments (years × 12)
DTI — Debt-to-Income ratio (typically 36-43%)

Explanation: The calculation determines what mortgage payment fits your budget, then calculates the corresponding loan amount.

3. Importance of Affordability Calculation

Details: Proper affordability calculations prevent overborrowing, ensure comfortable payments, and help with financial planning.

4. Using the Calculator

Tips: Enter gross annual income (before taxes), all monthly debt payments, current mortgage rates, and select your desired loan term.

5. Frequently Asked Questions (FAQ)

Q1: What is a good debt-to-income ratio?
A: Most lenders prefer ≤36% for housing expenses and ≤43% for total debt, though some programs allow higher.

Q2: Does this include property taxes and insurance?
A: This calculates principal and interest only. Add ~1.25% of home value annually for taxes/insurance.

Q3: How does credit score affect affordability?
A: Lower scores may qualify for smaller loans or higher rates, reducing affordability.

Q4: Should I use gross or net income?
A: Lenders use gross income, so this calculator does too for accurate estimates.

Q5: How much down payment should I plan for?
A: Standard is 20% to avoid PMI, but some loans allow as little as 3-5% down.