1. What is Mortgage Affordability?

Mortgage affordability refers to the maximum mortgage payment a borrower can comfortably afford based on their income and current interest rates. It helps determine how much house you can afford while maintaining financial stability.

2. How Does the Calculator Work?

The calculator uses the mortgage affordability formula:

Where:

• \( Income \) — Monthly income in currency
• \( 0.28 \) — Debt-to-Income (DTI) ratio (28%)
• \( Monthly\ Rate \) — Monthly interest rate
• \( Affordable \) — Maximum affordable mortgage payment per month

Explanation: The 28% DTI ratio is a standard guideline that suggests no more than 28% of gross monthly income should go toward housing expenses.

3. Importance of Mortgage Affordability Calculation

Details: Calculating mortgage affordability is crucial for financial planning, preventing over-borrowing, ensuring comfortable monthly payments, and maintaining overall financial health.

4. Using the Calculator

Tips: Enter your monthly income in currency and the current monthly interest rate. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: Why use 28% as the DTI ratio?
A: 28% is a widely accepted standard that balances housing affordability with other living expenses and savings goals.

Q2: What is included in the 28% DTI ratio?
A: This typically includes principal, interest, property taxes, homeowners insurance, and sometimes HOA fees.

Q3: Should I consider other debts when calculating affordability?
A: Yes, most lenders also consider total DTI (including other debts) which should typically not exceed 36-43% of income.

Q4: How does interest rate affect affordability?
A: Higher interest rates decrease affordability as more of your payment goes toward interest rather than principal.

Q5: Are there other factors to consider beyond this calculation?
A: Yes, also consider down payment, closing costs, property taxes, insurance, maintenance costs, and your overall financial situation.