Home Affordability Calculator

See what you can afford and find homes within your budget

Home Affordability Calculator

Welcome to our Home Affordability Calculator! Understanding how much home you can afford is a crucial first step in the home buying process. Our calculator will guide you through evaluating your finances to determine a realistic price range for your new home. Simply enter your financial details, and we'll provide an estimate of your affordable home price.

How Much House Can I Afford?

Several factors determine how much house you can afford, including your household income, monthly debt, savings, and down payment. By evaluating these elements, you can set a realistic budget and avoid financial strain.

Key Factors:

• Household Income - Your total income from all sources.
• Monthly Debt - Regular debt payments, such as car loans or student loans.
• Savings - Funds available for a down payment and closing costs.
• Down Payment - The initial amount paid towards the home.
• Monthly Payments - Projected mortgage payments, property taxes, insurance, etc.
• Budgeting - Ensuring that your mortgage fits within your overall financial plan.

Income and Expenses

Income and expenses are fundamental to determining home affordability. Assess your monthly income from all sources and categorize your expenses into fixed and variable.

Questions to Consider:

• What is your total monthly income?
• Do you have additional income sources?
• What are your monthly fixed expenses (e.g., rent, utilities)?
• What are your variable expenses (e.g., groceries, entertainment)?

Credit Score

Your credit score significantly impacts your mortgage terms and home affordability. A higher credit score can lead to better interest rates and loan terms.

Tips for Improving Your Credit Score:

• Pay bills on time.
• Reduce outstanding debt.
• Check your credit report for errors.

How Credit Score Impacts Affordability:

• Interest Rates - Higher scores generally qualify for lower rates.
• Loan Approval - A higher score improves your chances of mortgage approval.

Down Payment

A down payment is the initial payment made when purchasing a home. It affects your loan amount and monthly mortgage payments.

Saving for a Down Payment:

• Set savings goals.
• Consider gifts or grants.
• Look into down payment assistance programs.

Standard Down Payment Percentages:

Conventional loans typically require 20%, but options exist for lower percentages.

Impact on Affordability: A larger down payment reduces your mortgage amount and monthly payments.

Mortgages

Different types of mortgages offer various benefits and requirements.

Types of Mortgages:

• Conventional Loans - Standard loans without government backing.
• FHA Loans - Insured by the Federal Housing Administration, suitable for lower credit scores.
• VA Loans - Available to veterans and active military, backed by the Department of Veterans Affairs.
• USDA Loans - For rural and suburban homebuyers, backed by the U.S. Department of Agriculture.

Fixed-Rate vs Adjustable-Rate Mortgages:

• Fixed-Rate - Stable interest rate and payments.
• Adjustable-Rate (ARM) - Variable interest rates that can change over time.

Impact on Affordability: The type of loan affects your interest rate, down payment requirement, and monthly payments.

Interest Rates

Interest rates directly impact your mortgage payments. Lower rates mean lower monthly payments and overall cost.

Current Mortgage Rates: Rates fluctuate based on market conditions and economic factors.

Impact on Affordability: Lower interest rates increase affordability by reducing monthly payments.

28/36 Rule

The 28/36 rule is a guideline for home affordability, suggesting that:

• No more than 28% of your gross monthly income should go towards housing expenses.
• No more than 36% of your gross monthly income should go towards total debt.

Example: If your gross monthly income is $5,000:

• 28% for housing - $1,400
• 36% for total debt - $1,800

Why It's a Good Rule of Thumb: Helps maintain a balanced budget and avoid financial strain.

Other Factors that Affect Affordability

Homeownership involves various costs beyond the mortgage payment. Consider the following:

• Property Taxes
• HOA Dues
• Homeowners Insurance
• Private Mortgage Insurance (PMI)
• Maintenance Costs
• Utilities
• Location

How Location Affects Affordability: Different areas have varying costs of living, property taxes, and home prices.

Most Affordable Markets in the U.S.

Explore the most affordable housing markets based on factors like cost of living, median home prices, average household income, and taxes.