How to Calculate Hourly Rate from Weekly Salary

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Mortgage Affordability Calculator

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Your Estimated Maximum Mortgage Amount:

$0.00

This is the estimated maximum loan amount you might qualify for based on your inputs. It does not include down payment.

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Understanding Mortgage Affordability

This calculator helps you estimate the maximum mortgage loan amount you might qualify for based on your income and existing debts. It's a crucial step in understanding how much house you can realistically afford.

Key Factors Explained:

  • Monthly Income: Your gross (before tax) income each month. Lenders use this to determine your borrowing capacity.
  • Target Debt-to-Income Ratio (DTI): This is the percentage of your gross monthly income that goes towards paying all your monthly debt obligations, including your potential mortgage payment, car loans, student loans, and credit card minimums. Lenders typically have DTI limits, often around 36-43% for the total debt, and a specific limit for housing costs (front-end DTI). We use a target DTI to estimate affordability.
  • Estimated Monthly Property Taxes: Taxes levied by local government on your property. These are usually paid monthly as part of your mortgage escrow.
  • Estimated Monthly Homeowners Insurance: The cost of insuring your home against damage or loss. This is also typically paid monthly via escrow.
  • Annual Interest Rate: The percentage charged by the lender for borrowing money. This significantly impacts your monthly payment and the total interest paid over the life of the loan.
  • Loan Term (Years): The duration over which you agree to repay the loan. Common terms are 15 or 30 years. A shorter term means higher monthly payments but less interest paid overall.

How it Works:

The calculator first determines the maximum monthly debt payment you can afford based on your income and target DTI. It then subtracts your estimated monthly costs for property taxes and homeowners insurance from this maximum. The remaining amount is what's available for your monthly mortgage principal and interest (P&I) payment. Using standard mortgage formulas, it then calculates the largest loan principal you could take out to afford that P&I payment, given the interest rate and loan term you entered.

Important Considerations:

  • This calculator provides an estimate. Actual loan approval depends on many other factors, including your credit score, employment history, down payment amount, lender policies, and other assets.
  • This estimate does not include Private Mortgage Insurance (PMI) if your down payment is less than 20%, or Homeowners Association (HOA) fees, which can add to your total monthly housing cost.
  • Always consult with a mortgage professional or lender for personalized advice and pre-approval.

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