Affordability Calculator

Check your Home Affordability

Estimate the buying power you possess before beginning your home buying journey.

Understanding Home Affordability

Annual Household Income

Your annual household income is the total amount you, and possibly a co-borrower, earn each year before taxes. This includes all regular income sources such as:

Salary and wages
Tips and commissions
Rental income, if any

It's important to consider the entire household income to accurately assess your home affordability.

Monthly Debt

Monthly debt plays a crucial role in determining how much you can afford to pay for a mortgage each month. This includes:

Auto, student, and personal loans
Minimum credit card payments
Alimony and child support, if applicable

Debt-to-Income Ratio (DTI)

The Debt-to-Income Ratio is a key metric that lenders use to assess your ability to afford a mortgage. It's the percentage of your gross monthly income (what you earn before taxes) that goes towards paying off your monthly debts. You can calculate it as follows:

DTI% = (Monthly Debt / Gross Monthly Income) × 100

DTI is usually expressed as a range between 20% to 50%, indicating different affordability levels:

Front-End DTI (Housing Ratio)

This ratio includes only housing costs, such as:

Mortgage principal
Interest
Property taxes
Homeowner's insurance
PMI (Private Mortgage Insurance, if applicable)

Front-End DTI = (Monthly Housing Costs / Gross Monthly Income) × 100

Back-End DTI (Total Debt Ratio)

This ratio includes all monthly debt obligations, such as:

Everything in Front-End DTI (housing costs)
Credit card minimum payments
Car loans
Student loans
Personal loans

Back-End DTI = (Monthly Housing + Other Debt Payments / Gross Monthly Income) × 100

DTI is usually expressed as a range between 20% to 50%, indicating different affordability levels:

0%–28% (Affordable)

Front-end

This range suggests your monthly housing expenses are well within a healthy limit relative to your income.

29%–36% (Affordable)

Back-end

This range suggests you have a good balance between total monthly debt (including housing and other obligations) and income.

37% - 43% (Stretched)

Back-end

In this range, you're stretching your budget a bit more to accommodate housing costs.

44% - 50% (Difficult)

Back-end

This indicates a high level of debt relative to your income and suggests potential financial strain.

Other Key Factors in Home Affordability

Mortgage Rates

The interest rate on your mortgage significantly affects your monthly payment. A lower rate means a lower monthly payment for the same loan amount.

Monthly Mortgage Payment

This is the amount you'll pay each month towards your mortgage. It typically includes principal and interest, and it may also include property taxes and homeowners insurance if you have an escrow account.

Insurance and Property Tax

Homeowners insurance and property taxes are often included in your monthly mortgage payment. These costs vary depending on location and the value of your home.

Putting It All Together

To determine how much house you can afford:

1. Calculate Your DTI

This gives you an idea of how much of your income is already committed to other debts.

2. Consider Mortgage Rates and Terms

Shop around to understand the rates and terms available to you.

3. Estimate Insurance and Property Taxes

Get an idea of these costs in your desired area.

4. Calculate the Monthly Mortgage Payment

Using the above information, you can estimate your monthly mortgage payment. Make sure it fits comfortably within your budget.

Disclaimer: This is not an offer to lend. Terms and conditions for qualification apply for all loan types. Submit an application with Be My Neighbor (NMLS 1743790) to see what loan programs you may qualify for.