Home Affordability Calculator

Our house affordability calculator allows you to estimate how much home you can afford and your estimated monthly mortgage payments based on key financial factors like your income, debt obligations, interest rate, insurance and property taxes.

To use the home affordability calculator and discover how much home you can afford, simply enter the information requested. First, let’s go over a few of the fields to help you understand the types of information you need to get started.

Loan & Borrower Info

The Loan & Borrower Info tab gives the calculator information about your income, debt obligations, down payment and loan terms like the number of years and interest rate to predict how much home you can afford.

• Annual gross income: You can calculate your home affordability by income by sharing your annual gross income. This is the amount you earn per year before taxes. You can find this information on your pay stubs or tax returns to give you a more accurate number.
• Monthly debt payments: Your monthly debt payments include items like credit card payments, loans like car loans, student loans, existing mortgages and any other debt you pay on a monthly basis. It doesn’t include regular monthly bills like your electric, gas or internet bills.
• Maximum payment: Your maximum payment is the maximum monthly mortgage payment you can afford. You can enter this information by considering your income versus monthly costs and finding a figure you’re comfortable paying every month as your mortgage payment.
• Down payment: Your down payment is the amount you put down on a home. The higher your down payment, the less you’ll need to borrow, so putting down more upfront can increase your home affordability.
• Term (years): Your term is your loan term dictating how many years you have to pay off your mortgage loan. Terms vary by lender, bank or financial institution, but you can typically choose a 15- or 30-year loan term.
• Interest rate: The interest rate is the cost of borrowing from a lender and varies by location and borrower credit score while fluctuating regularly based on market conditions.

Taxes & Insurance

Taxes and insurance refer to yearly costs that may be rolled up into your monthly mortgage payment or paid upfront, depending on your needs. Common taxes and insurance borrowers are responsible for include the following:

• Property tax (yearly): Property tax is a fee based on the value of your property. These taxes are paid at the state and local levels to fund local initiatives like schools and community projects. You can find your property tax by searching for the current rates in your city, as they typically vary by county.
• Homeowners insurance (yearly): Homeowners insurance ensures you’re covered in case of damage to the property and will prevent you from paying out of pocket for repairs. Most lenders require homeowners insurance to protect their investors, but how much you pay depends on location and home value.
• Monthly HOA fee: A homeowners association fee is tied to new and high-end communities and condos to cover the costs of various community amenities like pools, garbage pick up and snow removal. HOA costs vary by location but can range from a few hundred to a few thousand dollars a month, depending on the community.

Assumptions

Assumptions compare your income to various types of debt, including existing debt and future debt from your mortgage, to ensure you can repay your mortgage on a monthly basis.

• Debt-to-income ratio: Your debt-to-income (DTI) ratio compares your gross monthly income to your debts to ensure you can afford to repay your mortgage with your existing debts. Typically, lenders like to see a DTI of 36% or lower.
• Housing ratio: Your housing ratio compares your monthly mortgage payment to your gross monthly income to ensure you can afford to pay your mortgage every month. Lenders typically like to see a housing ratio of 28% or lower.

The two top factors that impact your home affordability are your income and debts. The more debt you have, the less you have for your mortgage. Your debt-to-income ratio is the percentage of monthly gross income that goes toward paying your debts, and the lower your percentage, the more you can afford to pay for a home.

However, your income and debts aren’t the only factors lenders review to ensure you can afford a mortgage for a certain amount. Your credit score can impact your interest rate; the higher your score, the lower your interest rate might be and the less you’ll pay over the life of the loan.

Additionally, upfront payments like down payments effectively reduce how much you’ll need to borrow, which can increase how much home you can afford. Simply put, a higher down payment means a lower loan amount and lower monthly payments.

And finally, there are additional costs to homeownership many first-time borrowers don’t realize, such as property taxes, insurance and closing costs. To give you a better idea of your costs, you can use our closing costs calculator.

Lenders use the 28/36 rule to determine your home affordability and whether you qualify for a loan. The 28/36 rule refers to the front-end and back-end debt-to-income ratio. The front-end ratio compares your monthly house expenses to your gross monthly income, stating that your household expenses should not exceed 28% of your income. Meanwhile, the back-end ratio states that no more than 36% of your income should go towards paying your debts, including things like your mortgage, car loan, credit card payments and homeowners association fees.

Buying a home is a big investment, but it’s well worth it because property typically appreciates in value. Still, you don’t want to overburden yourself with debt. Here are a few tips to help you purchase an affordable home:

• Create a budget: Creating a budget by comparing your income to expenses is crucial because it helps you see how much is left over for paying off your mortgage every month.
• Get pre-approved for a mortgage: Getting pre-approved for a mortgage can help you determine how much home you can afford based on your current financial situation. However, it’s worth noting that getting pre-approved doesn’t necessarily guarantee your mortgage application will be accepted, or you’ll qualify for the same amount.
• Consider loan options: Different loan options may appeal to different borrowers. For instance, if you want low or no down payments and qualify, you may benefit from VA, FHA and USDA loans. You can also find credit union home loans, which tend to offer lower rates for members.
• Research different homes and areas: Home prices vary by location, so researching different areas can help you find more affordable homes requiring lower loan amounts to make purchasing a home more affordable.

The amount you need for a down payment varies significantly depending on your loan type and lender requirements. Conventional loans typically require 3-20% down, with most borrowers putting down 5-10%. If you can make a down payment of 20% or more, you’ll avoid private mortgage insurance (PMI).

Government-backed loans offer more flexible options for buyers with limited savings. FHA loans allow down payments of 3.5% for those with credit scores of at least 580. VA loans provide zero-down options for qualified veterans, while USDA loans offer zero-down financing for homes in eligible rural areas.

Buying a home involves several upfront costs beyond your down payment that can add up to thousands of dollars. Here are the main expenses you should budget for:

• Closing costs: These typically range from 2-5% of your home’s purchase price. They include loan origination fees, appraisal costs, title insurance and escrow fees
• Down payment: This usually ranges from 3-20% of the home price. Government-backed loans often allow lower down payments than conventional mortgages
• Earnest money: This shows you’re serious about buying and typically costs 1-2% of the purchase price. The good news is that this money goes toward your down payment at closing
• Home inspection: A professional inspection typically costs around $300-600, depending on location, and can save you a significant amount of money by identifying potential problems before you buy. This is money well spent to avoid costly surprises later
• Moving expenses: The cost of professional movers depends on the distance and the amount of belongings. If you plan on handling the move yourself, make sure to budget for the costs involved
• Immediate repairs and improvements: It’s often recommended to set aside 1-3% of your home’s value for urgent fixes or basic updates needed right after moving in. New homeowners often discover items that need attention once they’re living in the space

Numerous homebuying assistance programs exist at the federal, state and local levels to help make homeownership more affordable. Federal programs include FHA loans with low down payments, VA loans with zero-down financing for military families and USDA loans for eligible rural areas. Many states offer down payment assistance grants or low-interest loans that don’t require repayment unless you sell or refinance.

First-time homebuyer programs, typically defined as anyone who hasn’t owned a home in three years, provide education courses and additional benefits. Employer-assisted housing programs are becoming more common, offering down payment loans or grants to help employees afford homes. To find programs in your area, contact your state housing finance agency or local HUD-approved housing counseling agencies for comprehensive assistance options.