First-time Home Buyer Interest Rate Calculator

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Mortgage Affordability Calculator

Understanding how much house you can afford is a crucial first step in the home-buying process. This mortgage affordability calculator helps you estimate the maximum mortgage amount you might qualify for, based on your income, debts, and desired loan terms. Remember, this is an estimate, and your actual loan approval will depend on a lender's full underwriting process.

How Mortgage Affordability Works

Lenders typically use two main ratios to determine how much they're willing to lend you: the Debt-to-Income (DTI) ratio.

  • Front-End Ratio (Housing Ratio): This ratio compares your potential monthly housing expenses (principal, interest, taxes, insurance, and HOA fees – often called PITI) to your gross monthly income. Many lenders prefer this to be no more than 28%.
  • Back-End Ratio (Total DTI): This ratio compares all of your monthly debt obligations (including the estimated PITI) to your gross monthly income. Lenders generally prefer this to be no more than 36%, though some programs allow up to 43% or even higher with compensating factors.

This calculator focuses on estimating the maximum loan amount based on the back-end DTI ratio, assuming a lender's common maximum of 36% of your gross monthly income for total debt obligations. It also factors in your down payment to estimate the maximum home price you could afford.

Important Considerations:

  • PITI Components: Property taxes, homeowner's insurance, and potential Private Mortgage Insurance (PMI) or HOA dues are not included in this basic calculation but will significantly impact your actual monthly payment and affordability.
  • Closing Costs: This calculation does not include closing costs, which can add several percentage points to the loan amount.
  • Lender Specifics: Different lenders have different qualification criteria and may use different DTI limits.
  • Credit Score: Your credit score will heavily influence the interest rate you are offered, which in turn affects affordability.
  • Reserves: Lenders may require you to have a certain number of months of mortgage payments in reserve.

This tool provides a helpful starting point. For a precise understanding of your borrowing power, consult with a mortgage lender.

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Your Estimated Affordability:

" + "Maximum Monthly Mortgage Payment (P&I Estimate): " + formattedMaxMortgagePayment + "" + "Estimated Maximum Loan Amount: " + formattedMaxLoan + "" + "Estimated Maximum Home Price (incl. Down Payment): " + formattedMaxHomePrice + ""; }

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