# Using a Home Affordability Calculator

If you’re thinking about buying a home or have already started to shop for a home, you might be wondering how much you can afford to spend to buy a home. Finding out how much you can afford before you start looking at homes is smart because if you know what your home affordability figure is, you won’t look at homes that are too pricey or overlook a higher-priced home that may be affordable.

The best way to find out how much you can afford is to apply for a mortgage, but if you just want to get a preliminary rough estimate, a home affordability calculator should be just the ticket.

How a Home Affordability Calculator works
A home affordability calculator works a lot like other mortgage calculator tools do: You enter your information into the home affordability calculator and the calculator will tell you approximately how much you can afford to spend to buy a home.

Here are the numbers you’ll need to enter into a home affordability calculator:

• how much cash you have for your down payment
• the total of your monthly minimum payments on your other debts
• the annual homeowner’s insurance premium
• the annual property taxes
• the interest rate and term of your mortgage

Can you afford a more costly home?
The calculations made by a home affordability calculator typically are based on a 36% ratio of your monthly debts to your monthly gross income, or what’s know as a debt-to-income ratio (DTI). But some lenders will let you get a mortgage with a higher DTI. That means a home that’s more expensive than the amount that the home affordability calculator suggests might still be affordable for you if you’re comfortable with that amount.

Calculator computes home affordabilty
A good home affordability calculator should take into account the property taxes and insurance that you enter into the calculator to figure out how much you can afford to spend to buy a home. Taxes and insurance are major expenses for most homeowners, so it’s important that those amounts be included in home affordability estimates.

Keep in mind, also, that while the home affordability calculator may include property taxes and insurance in the amount that you can afford, those costs might not be included in the monthly payment that the calculator presents to you. More likely, the home affordability calculator will suggest a monthly payment that includes principal and interest, but not taxes and insurance.

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