How the Home Affordability Calculator works
Affordability is a cash-flow estimate, not the largest amount a lender may approve. This tool reserves part of gross income for debts and converts the remaining monthly capacity into an amortized mortgage balance, then adds the down payment.
Method: Affordable housing payment = gross monthly income × housing ratio − monthly debts; that payment is converted to a loan balance.
Inputs to review
- Gross annual income: Use a realistic current value and test a conservative alternative.
- Other monthly debt payments: Use a realistic current value and test a conservative alternative.
- Available down payment: Use a realistic current value and test a conservative alternative.
- Mortgage interest rate: Use a realistic current value and test a conservative alternative.
- Loan term: Use a realistic current value and test a conservative alternative.
- Maximum debt-to-income ratio: Use a realistic current value and test a conservative alternative.
How to interpret the result
Use the result as a ceiling for scenario planning. Test a lower ratio, higher rate, and smaller down payment. A price that remains comfortable under conservative inputs is more useful than a maximum that leaves no room for repairs or changes in income.
Assumptions and limitations
The calculation does not model property tax, insurance, mortgage insurance, closing costs, credit standards, or local underwriting rules. Those costs generally reduce affordability.
Recalculate when rates, balances, income, goals, or time horizons change. A useful estimate is a range built from several plausible scenarios, not a single precise-looking number.