Home Affordability Calculator

The DTI ratio is your total monthly debt payments divided by your gross monthly income. Lenders use it to assess your ability to repay a loan. A lower DTI ratio means you have more income available for housing and other expenses. Most lenders prefer a DTI below 43%, though some may accept higher ratios. A good DTI ratio (28-36%) indicates healthy financial management.

The standard down payment is 20%, which avoids private mortgage insurance (PMI). However, you can put down as little as 3-5% with FHA loans or conventional loans with PMI. A larger down payment reduces your monthly payment and total interest paid. A smaller down payment requires less upfront cash but increases your monthly payment and may require PMI. Use our calculator to compare different down payment scenarios.

Your credit score significantly impacts the interest rate you qualify for. A higher credit score (typically 740+) gets you better rates, potentially saving thousands over the loan term. A lower credit score may result in higher rates or difficulty qualifying for a loan. Before applying for a mortgage, work on improving your credit score by paying bills on time and reducing debt.

If your DTI ratio exceeds 43%, you have several options: (1) Increase your income through a raise or additional job, (2) Reduce your monthly debts by paying off credit cards or loans, (3) Look for a less expensive home, (4) Increase your down payment to reduce the loan amount, or (5) Wait for interest rates to drop, which can lower your monthly payment.

Yes! Getting pre-approved gives you a clear budget and shows sellers you're a serious buyer. Pre-approval involves a lender reviewing your finances and confirming how much you can borrow. It's different from pre-qualification, which is just an estimate. Pre-approval strengthens your offer in competitive markets and helps you focus on homes within your budget.

Interest rates have a major impact on affordability. A 1% increase in interest rate can reduce your maximum home price by $50,000 or more. Lower rates mean lower monthly payments and higher affordability. Rates vary by lender, credit score, and loan type. Use our calculator to see how different rates affect your maximum home price and monthly payment.

A fixed-rate mortgage has the same interest rate for the entire loan term, providing predictable payments. An adjustable-rate mortgage (ARM) starts with a lower rate that increases after a set period. ARMs can save money initially but carry risk if rates rise significantly. Fixed-rate mortgages are generally safer for long-term planning and budgeting.

Absolutely! Property taxes and homeowners insurance can add 30-50% to your base mortgage payment. These vary by location and property value. Our calculator focuses on the mortgage payment, but you should budget for these additional costs. Research typical property taxes and insurance costs in your area to get a complete picture of your monthly housing costs.

Yes, but the process is more complex. Lenders typically require 2 years of tax returns and may average your income over that period. Self-employed borrowers may face stricter requirements and higher interest rates. Work with a lender experienced in self-employed mortgages. Having strong financial records and a healthy business helps improve your approval chances.

If your income increases, you have more financial flexibility and could pay off your mortgage faster. If your income decreases, you may struggle with payments. This is why it's important not to max out your budget—having a lower DTI ratio provides a cushion for income changes. Consider your job stability and future income prospects when determining your home budget.