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Mortgage affordability calculator
Find out how much house you can afford before you apply for a mortgage.
Use the calculator to get an idea of how much you can borrow and what your monthly or biweekly repayments would be depending on the loan term you choose. You can change the fields as many times as you want and recalculate to find out how much different mortgage amounts and types will cost.
How to use the calculator
- Enter your loan details, including down payment, loan term and your estimated interest rate.
- Provide your monthly income. This includes your monthly wages as well as any other sources of income, like alimony, Social Security or investment property income.
- Add your monthly expenses. Include any car payments, credit card payments, alimony or child support or other forms of debt.
- Hit Calculate to learn how much home you can afford.
What’s in a mortgage payment?
Your mortgage payment includes quite a bit more than what you’re paying for the actual loan, and there’s a simple acronym to remember the components. PITI stands for Principal, Interest, Taxes and Insurance, which includes the following:
- Principal. The amount you pay towards your actual loan.
- Interest. The amount the lender charges you to make the loan.
- Property taxes. The county uses your home’s assessed value to determine your property taxes, but the amount of your tax is based on where you live.
- Homeowners insurance. Your lender will require a specific level of coverage, but you add to that as you see fit. The cost depends on the coverage you get and your insurer.
- Private mortgage insurance (PMI). If you put less than 20% down on your loan, you’ll probably have to buy PMI until you can build up enough equity to discontinue it. PMI can cost between .50% and 1.0% of your loan amount annually but is broken up and added to your monthly payment.
What other costs should I consider?
Owning a home means no longer having a landlord to take care of things when they go wrong. But paying for the maintenance and repairs on your home isn’t the only new expense you’ll account for when trying to decide if you can afford your house.
According to Tyler Forte, Co-Founder and CEO of Felix Homes, “One of the biggest mistakes is not considering the fees and additional costs you need to pay when purchasing a home. These include appraisal fees, closing costs, moving costs, etc. These add up quickly and can impact the amount you’ll be able to set aside for your down payment.”
Kalicia Bateman a mortgage specialist and editor at BestCompany.com, also stressed the importance of considering unexpected costs, adding that “you should also factor home furnishings and home upkeep costs.”
Many financial planners talk about “the 28% rule,” which says that your mortgage payment shouldn’t make up more than 28% of your income. Whether that’s true for you, consider the following possible expenses when deciding your budget:
- Homeowners Association (HOA) fees
- Flood or earthquake insurance
- Fluctuating heating and cooling costs
- Updates and remodels
- Carpet cleaning
- Pest control
- Home security fees
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How do lenders determine how much I can afford?
In addition to the regulations set by government agencies, such as the Consumer Financial Protection Bureau (CFPB), each lender has qualification standards for its mortgage products. Lenders typically take the following into account:
Most lenders require somewhere close to a 620 credit score or higher to qualify for a mortgage. There are products that accept less, but even if your score is higher than the minimum requirement, it can affect how much the lender thinks you can afford.
Debt-to-income (DTI) ratio
This ratio has two parts.
- Front-end ratio. Also known as your mortgage-to-income ratio, this combines the PITI components of your monthly mortgage payment and determines what percentage of your annual gross income will make up your mortgage payments. Lenders want to keep that beneath 28%.
- Back-end ratio. This is your debt-to-income ratio, and it’s determined by all the monthly debt payments you make compared to your monthly income, including your mortgage payment. Until December 2020, the CFPB required that this DTI not exceed 43%. But the CFPB made changes to that rule to expand what lenders can consider when determining what a borrower can afford.
The ideal down payment for any lender is 20%. But there are mortgage products that require 3% or even 0% down, if you qualify.
How do I estimate an affordable property price?
Once you have an idea of how much you can afford monthly, you’re one step closer to knowing the properties you should focus on. Tapping the experience of a real estate professional, like an agent or broker, can further help you narrow down a realistic price range.
Most online real estate sites include mortgage loan calculators that adjust your potential monthly loan repayment based on a property’s price, how much you’re putting down, the rates and terms you can reasonably expect and taxes.
Calculating how much mortgage you can afford can help you shop for a house in your budget and get approved by the lender you want. If you’re not sure which lender offers the best deal for your finances, compare mortgage lenders to find your best fit.
Frequently asked questions
How much should I budget each month for maintenance and repairs?
Rule of thumb is to budget 1% of the property’s value each year for maintenance and repairs. For example, if you buy a $300,000 house, budget $3,000 a year — or $250 a month — for repairs. If you’re buying an older house, you may want to set aside more.
How else can I increase my borrowing power?
A mortgage with a low interest rate can help lower your monthly payments, making it possible to borrow a higher amount. A good credit score will help you get the most competitive rates. If you’re thinking about buying a home in the future, start working on your credit as soon as possible.
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