Q1: How much mortgage can I afford?
Mortgage affordability is based on the 28% rule: your monthly mortgage payment should not exceed 28% of your gross monthly income. This calculator factors in your income, existing debt payments, interest rate, and loan term to determine the maximum mortgage amount you can qualify for.
Q2: What is the difference between mortgage affordability and home affordability?
Mortgage affordability calculates the maximum loan amount you can borrow. Home affordability includes the mortgage plus your down payment to determine the total home price you can afford. This calculator focuses on mortgage amount only.
Q3: How do existing debts affect mortgage affordability?
Existing monthly debt payments reduce the amount available for your mortgage. Lenders consider your debt-to-income ratio (DTI). This calculator subtracts your monthly debt from the 28% housing allowance to show how much mortgage payment you can actually afford.
Q4: What interest rate should I use?
Use current market mortgage rates for your credit profile and loan type. Rates vary by credit score, loan type (conventional, FHA, VA), and market conditions. Check with lenders or use current average rates. Even a 0.5% rate difference can significantly affect affordability.
Q5: Should I choose a 15-year or 30-year mortgage?
A 30-year mortgage allows you to qualify for a larger loan amount (lower monthly payments) but costs more in total interest. A 15-year mortgage has higher monthly payments but saves significantly on interest. Choose based on your monthly budget and long-term financial goals.
Q6: What if the calculated amount seems too high or too low?
The calculator provides estimates based on standard lending guidelines. Actual approval amounts may differ based on: credit score, employment history, assets, loan type, lender policies, and local market conditions. Consult with mortgage lenders for personalized pre-approval amounts.