Home
Back
Zillow's Affordability Formula:
| From: | To: |
The Zillow Affordability Calculator estimates how much house you can afford based on your income, debts, and current mortgage rates. It uses the standard 28% housing expense ratio recommended by many financial experts.
The calculator uses Zillow's affordability formula:
Where:
Explanation: The 28% ratio represents the maximum recommended percentage of your income that should go toward housing expenses. The loan factor converts your maximum monthly payment into a total loan amount.
Details: Calculating home affordability helps prevent being house-poor (spending too much on housing) and ensures you can comfortably make mortgage payments while covering other expenses.
Tips: Enter your annual gross income (before taxes), annual debt payments (car loans, credit cards, student loans, etc.), current mortgage interest rate, and desired loan term. All values must be positive numbers.
Q1: Why use 28% as the housing ratio?
A: 28% is a commonly recommended maximum that balances housing costs with other financial obligations and savings goals.
Q2: What's included in annual debts?
A: Include minimum payments on car loans, credit cards, student loans, personal loans, and other recurring debt obligations.
Q3: Does this include property taxes and insurance?
A: The 28% ratio typically includes principal, interest, taxes, and insurance (PITI). This calculator provides the loan amount - you may need to adjust for taxes and insurance in high-cost areas.
Q4: How does down payment factor in?
A: This calculates the total home price you can afford. If you have a down payment saved, you could look at more expensive homes (total price = affordable price + down payment).
Q5: Should I spend less than the maximum amount?
A: Many financial advisors recommend spending less than the maximum to maintain financial flexibility for savings, investments, and unexpected expenses.