Zillow Home Affordability Calculator

Home Affordability Formulas:

\[ \text{Max Payment} = \text{Income} \times 0.36 - \text{Other Debts} \] \[ \text{Price} = \text{Max Payment} \times \frac{1 - (1 + r)^{-n}}{r} \]

Monthly Income:

USD

Monthly Other Debts:

USD

Annual Interest Rate:

Loan Term:

Maximum Monthly Payment:

Affordable Home Price:

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Home Affordability Calculator?

The Zillow Home Affordability Calculator helps determine how much house you can afford based on your income, debts, and current mortgage rates. It follows the standard 36% debt-to-income ratio guideline used by most lenders.

2. How Does the Calculator Work?

The calculator uses two main formulas:

\[ \text{Max Payment} = \text{Income} \times 0.36 - \text{Other Debts} \] \[ \text{Price} = \text{Max Payment} \times \frac{1 - (1 + r)^{-n}}{r} \]

Where:

\( \text{Income} \) — Gross monthly income (USD)
\( \text{Other Debts} \) — Monthly debt obligations (USD)
\( r \) — Monthly interest rate (decimal)
\( n \) — Loan term in months
0.36 — Standard debt-to-income ratio (36%)

Explanation: The first formula calculates your maximum affordable monthly payment, while the second converts that payment into a home price based on current mortgage terms.

3. Importance of Home Affordability

Details: Understanding what you can afford before house hunting prevents financial strain and helps set realistic expectations. Lenders typically cap housing payments at 28-36% of gross income.

4. Using the Calculator

Tips: Enter your gross monthly income (before taxes), all monthly debt payments (car loans, credit cards, etc.), current mortgage rates, and desired loan term. The calculator will show your maximum monthly payment and corresponding home price.

5. Frequently Asked Questions (FAQ)

Q1: Why use 36% debt-to-income ratio?
A: This is the maximum ratio most conventional lenders allow, with 28% typically allocated to housing and 8% to other debts.

Q2: What's not included in this calculation?
A: The calculator doesn't account for property taxes, insurance, HOA fees, or down payment requirements, which affect actual affordability.

Q3: Should I spend the maximum amount calculated?
A: Not necessarily. Consider your savings goals, emergency fund, and lifestyle preferences when deciding your actual budget.

Q4: How does credit score affect affordability?
A: While not directly in this calculation, lower credit scores may qualify you for higher interest rates, reducing your purchasing power.

Q5: Is this calculator accurate for adjustable-rate mortgages?
A: It's best suited for fixed-rate mortgages. ARMs have payment uncertainty after the initial fixed period.