A home affordability calculator is a tool that helps you determine how much house you can afford based on your income, expenses, and current mortgage rates. To use a home affordability calculator, you typically input information such as your income, debts, down payment, and the type of loan you plan to use.
The calculator will then provide an estimate of how much house you can afford, taking into account your specific circumstances, such as the interest rate, taxes, and insurance.
The home affordability calculator will then calculate your debt-to-income ratio (DTI) which is the percentage of your income that goes towards paying off debts, including your mortgage payment. Generally, lenders look for a DTI of 36% or less, but some may allow a higher ratio.
It’s important to note that the results provided by a home affordability calculator are estimates and may not reflect your actual home-buying capacity. It’s always best to consult with a mortgage lender or financial advisor to get a more accurate assessment of your finances and what you can afford.
Additionally, other factors like your credit score, and your future plans like starting a family or any other significant expenses, should also be considered when determining your home affordability.