Overview
Home buyers need two numbers: what their payment would be on a specific home, and how much home they can afford based on their finances. These are related but different calculations that should be used at different stages of the home buying process.
The Mortgage Calculator tells you the monthly payment for a given home price, rate, and term. The Mortgage Affordability Calculator works backward from your income and debts to tell you the maximum home price you should consider.
Key Differences
**Direction:** The mortgage calculator starts with a home price and gives you a payment. The affordability calculator starts with your income and gives you a price range.
**Inputs:** The mortgage calculator needs home price, down payment, rate, and term. The affordability calculator needs annual income, monthly debts, down payment, and sometimes credit score.
**When to use:** Use affordability first to set your budget. Then use the mortgage calculator to evaluate specific homes within that budget.
**What it tells you:** The mortgage calculator gives exact numbers for one scenario. The affordability calculator gives a comfortable and maximum price based on lending guidelines.
**DTI ratio:** The affordability calculator factors in your debt-to-income ratio (typically capped at 28% for housing and 36% total). The mortgage calculator does not consider your income.
When to Use the Mortgage Calculator
- You found a specific home and want to know the monthly payment - You want to compare payments across different interest rates or loan terms - You want to see the full amortization schedule for a particular loan - You are refinancing and want to calculate the new payment - You want to compare the total interest cost of 15-year versus 30-year loans
When to Use the Mortgage Affordability Calculator
- You are starting your home search and want to set a realistic budget - You want to know how much house your income supports - You want to see how your debts (car loan, student loans) limit your home buying power - You want to understand how a larger down payment expands your price range - You are pre-qualifying and want to estimate what a lender would approve
Frequently Asked Questions
Q: Should I buy the maximum I can afford? A: Generally no. Just because a lender approves you for $400,000 does not mean you should spend that much. Leave room for savings, emergencies, and lifestyle expenses.
Q: What debt-to-income ratio do lenders use? A: Most lenders cap the front-end ratio (housing costs) at 28% and the back-end ratio (all debts including housing) at 36-43% of gross income.
Q: Does the affordability calculator include property taxes and insurance? A: Yes. A good affordability calculator factors in estimated property taxes, homeowners insurance, and PMI to give you a realistic picture.
Q: How much should I put down? A: 20% avoids PMI (private mortgage insurance), but many buyers put down 3-10%. A larger down payment reduces your monthly payment and increases your purchasing power.
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