LendingTree’s home affordability calculator provides more information than just house affordability. It details the effect homebuying might have on your take-home pay to help you make an informed decision that doesn’t squeeze your budget.
The estimated price you could afford. The recommended home price is based on a “conservative” estimate highlighted in green. If you want to get more aggressive, slide the toggle to the right into the red range. The home price goes up, but so does the debt-to-income ratio (DTI), which means you’re taking on more debt compared to your income.
The monthly payment. The mortgage payment figure includes an estimate of property taxes and homeowners insurance. You can enter tax and insurance information for a specific home in the “advanced options” to get more precise affordability feedback.
The debt-to-income ratio (DTI) used. The home affordability calculator is designed to suggest a conservative sales price you can afford. Financial planners recommend spending no more than 36% on total debt, including a mortgage payment, and no more than 28% on mortgage payments each month. This is known as the 28/36 rule. Some mortgage lenders can approve you with up to a 50% DTI, but studies show it may be harder to make the payments if hard financial times hit.
Monthly budget breakdown. One feature unique to LendingTree’s home affordability calculator is how much income is left over after subtracting your mortgage payment, debts and tax deductions from your paycheck. This is called “residual income,” and it’s a valuable number to determine whether a particular home fits into your overall budget.
When you get preapproved for a mortgage, lenders don’t review day-to-day expenses like daycare or school tuition, food, utilities, cell phone service or uncovered medical costs. The money that’s left over reflects how much you’ll have each month to cover all of your other monthly expenses.
And don’t forget about other costs of homeownership, like yard maintenance, floor upgrades, new paint or replacing an appliance. Consider budgeting at least 1% of the home’s purchase price annually toward maintenance and repairs. You’ll want to save even more for a larger home or one with older systems and appliances.