In our last article, we promised you a calculator so you can copy our methodology and calculate ‘affordable’ houses by determining what an acceptable monthly payment would be. In our current article, we deliver: the following is a home affordability calculator, which estimates whether you can handle the payments on a new mortgage based upon interest rates and your current debts and income.
Home Affordability Calculator
Asynthetic index of home affordability can be constructed based upon down payments, mortgage interest rates, front end debt to income ratios, and a salary. Bank Rate reports that 28% is a good debt to income ratio, so we have populated the tool with that number – but rather than forcing numbers upon you, we present this calculator where you can force numbers upon yourself!
Note that the ‘affordability’ number presented is a measure of how much house can be afforded with a designated monthly payment – Salary divided into 12 months, multiplied by the front end debt to income ratio. This happens to be the way that many people shop for homes, for better or worse. Your own situation is unique – although using the proper set of inputs can determine what a bank may offer you in terms of credit, the amount of house you purchase is an individual decision. For better or worse, this is how a huge subset of home buyers shops for a home.