Home Affordability Calculator Realtor

Affordability Formula:

\[ Affordable = \frac{(Income \times DTI - Debts)}{\left(\frac{r}{1 - (1 + r)^{-n}}\right)} \]

Monthly Income:

USD

DTI Ratio:

decimal (0.0-1.0)

Monthly Debts:

USD

Interest Rate:

decimal (e.g., 0.05 for 5%)

Loan Term:

months (e.g., 360 for 30 years)

Affordable Home Price:

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1. What is the Home Affordability Calculator?

The Home Affordability Calculator estimates the maximum home price you can afford based on your income, debts, debt-to-income ratio, and current mortgage rates. This follows the standard affordability calculation used by Realtor.com and other real estate platforms.

2. How Does the Calculator Work?

The calculator uses the affordability formula:

\[ Affordable = \frac{(Income \times DTI - Debts)}{\left(\frac{r}{1 - (1 + r)^{-n}}\right)} \]

Where:

\( Income \) — Gross monthly income (USD)
\( DTI \) — Debt-to-income ratio (decimal)
\( Debts \) — Monthly debt payments (USD)
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Loan term in months

Explanation: The numerator calculates your maximum allowable monthly payment, while the denominator converts this to a loan amount using standard mortgage math.

3. Importance of Affordability Calculation

Details: Knowing your affordable price range helps you shop for homes within your budget and get pre-approved for the right mortgage amount.

4. Using the Calculator

Tips: Use gross (pre-tax) income. Include all monthly debts (car payments, student loans, credit cards). Typical DTI limits are 0.36-0.43 for conventional loans.

5. Frequently Asked Questions (FAQ)

Q1: What's a good DTI ratio?
A: Most lenders prefer ≤0.36 for housing expenses and ≤0.43 for total debts, though some programs allow higher.

Q2: Does this include property taxes and insurance?
A: This calculates principal and interest only. Add 20-30% to the payment for taxes and insurance.

Q3: How does down payment factor in?
A: This calculates total price. Subtract your down payment to determine the loan amount needed.

Q4: What interest rate should I use?
A: Check current market rates. Rates change daily and vary by loan type/term.

Q5: How accurate is this estimate?
A: This provides a general guideline. Actual approval amounts depend on credit, assets, and lender policies.