How much home can you afford? An affordability calculator can help you figure that out. We have an affordability calculator on your website that can help you determine just how much you can afford by calculating your monthly income to debt ratio. When it comes to buying a home, the conventional debt limit is 36% of your monthly income; however, it can be higher for FHA loans. The ideal income after debt and taxes need to be high enough to cover your living expenses.
We have some terms and definitions for the affordability calculator that can help you understand how to use it and what it means.
Your annual income should be all the income of your household. You should add up all income from salary, bonuses, commissions, tips, overtime, investments, child support, alimony, etc. before taxes.
Your down payment is the amount of money that you will use toward your home at closing. The more you can put down, the lower your mortgage payment will be. However, you should always try to keep enough money on hand to help pay for any unexpected problems that can arise.
In the monthly debt section you should calculate all the money you have going out, such as car payments, child support, alimony, credit card payments, loans, insurance, etc. If you pay it each month, you need to include it so you will have a more accurate idea of what you can afford at the end of the month.
You will need to factor in the interest rate. Therefore, we have a default setting for a 30-year fixed rate on our affordability calculator.