How Much House Can I Afford – Mortgage Affordability Calculator


How Much House Can I Afford - Mortgage Affordability Calculator

Forget traditional mortgage qualification rules-of-thumb like 28% or 36% of earned income. These rough guidelines don't accurately answer the "how much house can I afford" question because too many other financial variables are ignored.

Instead, use this mortgage affordability calculator to convert what you currently pay in rent (or could afford to pay in rent) into the equivalent mortgage payment. By using actual cash outflows (rent) and current interest rates you get a more realistic perspective on how much mortgage you can afford.

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Rent payment you can afford:
Expected mortgage interest rate:
Mortgage term (years):
Expected annual property taxes:
Expected annual insurance:
Downpayment % 0% 5% 10%
Mortgage you can afford:
Down payment amount:
Price of home:

How Much House Can You Afford?

Are you thinking about buying a house and getting a mortgage?

If so, you’re probably hearing advice from friends, family, co-workers, and maybe even strangers. Some might be telling you that now is the best time to buy while others are urging you to wait.

The Mortgage Affordability Calculator will show you the mortgage you can afford based on a rent payment you can make. Instead of using rules-of-thumb percentages, the Mortgage Affordability Calculator tailors the results to what you can actually pay.

But before you buy, make sure you’re truly ready . . . .

Signs That You Are Ready To Buy A House

The math is important, but consider all factors at play before you buy a house. Here’s how you know you’re ready:

  1. You can afford the monthly payments. Carefully evaluate your financial standing. Put together a realistic budget detailing all your expenses so you know how much you can really afford. If you already know how much you can pay in rent, the Mortgage Affordability Calculator will help you find how much house you can afford.
  2. You have enough savings for the down payment. The down payment is a percentage you pay upfront toward the mortgage balance. Most lenders require you to make a down payment, which is usually up to 20% of the value of the house. Save at least up to the required down payment – preferably more – before you get a mortgage.
  3. You have a reliable source of income. Buying a house requires a serious financial commitment, so make sure your job is stable. Are both you and your spouse working? Are you relying on one income? Take these factors into consideration.
  4. You have saved up an emergency fund. Many experts recommend saving somewhere between three and nine months of expenses in an emergency fund before you buy a house.
  5. You have a healthy credit score. When you apply for a mortgage, lenders will look at your debt-to-income ratio, credit score, and more. You don’t need to have perfect credit when applying for a mortgage, but a decent credit score can help you obtain a lower interest rate and monthly payment.

There are other important, non-financial considerations too:

  • Do you like the location?
  • How long will you live in the house?
  • Does the house have enough room to support a growing family?

Think through these issues as you’re working with the Mortgage Affordability Calculator.

How To Find An Acceptable Monthly Payment

If you’re not sure what to enter into the “rent payment you can afford” box, that’s okay. Use the Budget Calculator to determine a proper housing allowance based on your income.

Also, start and maintain a budget that takes into account all your expenses. You don’t want to discover years down the road that some of your mortgage dollars could have been better utilized building up your retirement.

Final Thoughts

Most homeowners buy without fully preparing for the added responsibilities.

As a homeowner, you’ll always face ongoing responsibilities and repairs, especially if you buy an older home. Before you decide to buy a house, it is important to weigh your options. The Mortgage Affordability Calculator will give you a real-world mortgage amount you can afford.

Do your homework, be realistic, and buy a mortgage that’s right for you – in the right timing and for the right reasons!

Mortgage Affordability Calculator Terms & Definitions

  • Mortgage – The charging of real property by a debtor to a creditor as security for a debt, on the condition that it shall be returned on payment of the debt within a certain period.
  • Rent – A tenant’s regular payment to a landlord for the use of property or land.
  • Mortgage Term – The agreed length of time the mortgage will be paid until it is paid in full.
  • Interest Rate – The rate at which interest is paid by a borrower for the use of money that they borrow from a lender.
  • Property Tax – A levy on property that the owner is required to pay.
  • Insurance – A practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.
  • Down Payment – An initial payment made when something is bought on credit.
  • Credit Score – A number assigned to a person that indicates to lenders their capacity to repay a loan.

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