1. What is Home Affordability?

Home affordability refers to the maximum home price you can comfortably afford based on your income, existing debts, and other financial obligations. It's calculated using your debt-to-income (DTI) ratio and payment factors.

2. How Does the Calculator Work?

The calculator uses the affordability formula:

Where:

• \( Monthly\ Income \) — Your gross monthly income before taxes
• \( DTI\ Ratio \) — Your maximum acceptable debt-to-income ratio (typically 28-43%)
• \( Payment\ Factors \) — Monthly costs per dollar of mortgage (includes taxes, insurance, etc.)

Explanation: The equation calculates how much home you can afford based on what portion of your income can go toward housing costs.

3. Importance of Affordability Calculation

Details: Calculating home affordability helps prevent overextending yourself financially and ensures you can comfortably make mortgage payments while covering other living expenses.

4. Using the Calculator

Tips: Enter your monthly income before taxes, your target DTI ratio (lenders typically use 36% as a maximum), and the payment factors (ask your lender for this value). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Most lenders prefer a DTI below 36%, with no more than 28% of that going toward housing expenses.

Q2: What are payment factors?
A: Payment factors include principal, interest, property taxes, homeowners insurance, and possibly PMI or HOA fees.

Q3: Should I use gross or net income?
A: Lenders typically use gross income, but for personal budgeting, you might want to consider net income.

Q4: How accurate is this calculator?
A: This provides an estimate. Actual loan amounts depend on credit score, interest rates, and lender policies.

Q5: What other costs should I consider?
A: Remember to budget for maintenance (1-3% of home value annually), utilities, and potential HOA fees.