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How affordability is calculated

The most important factors that determine how much you can afford:
  • Your monthly payments include mortgage payment, home insurance, property taxes, HOA fees, and other financial considerations. Our mortgage calculator can help you determine the monthly payments for a home at a specific price.

    Our mortgage calculator can help you determine the monthly payments for a home at a specific price.

  • Lenders determine what you can afford by looking at your debt-to-income (DTI) ratio, just like our affordability calculator estimates the price of the home you can afford. A DTI ratio of 50% is the maximum allowed to approve the loan.

Affordability calculator

We'll help you estimate how much house you can afford.

How affordability is calculated

The most important factors that determine how much you can afford:
  • Your monthly payments include mortgage payment, home insurance, property taxes, HOA fees, and other financial considerations. Our mortgage calculator can help you determine the monthly payments for a home at a specific price.

    Our mortgage calculator can help you determine the monthly payments for a home at a specific price.

  • Lenders determine what you can afford by looking at your debt-to-income (DTI) ratio, just like our affordability calculator estimates the price of the home you can afford. A DTI ratio of 50% is the maximum allowed to approve the loan.

Home affordability glossary

NewHomesMate’s affordability calculator estimates how much house you can afford based on your annual income, monthly debts and down payment.

Our calculator also includes advanced settings for a precise affordability estimate, including specific amounts of property taxes, homeowner’s insurance and HOA dues if they apply.

Annual Income

This includes all the money you and your co-borrower make before taxes, including salary, wages, tips, commission, and any other regular income, such as rental income. Example: Let’s say you and your spouse have a combined annual income of $120,000. This is your annual household income.

Total Monthly Debts

It's a snapshot of your monthly obligations towards debt repayment. You should include expenses such as the following: car, student and personal loans, minimum credit card debt payments, alimony and child support. You should not include living expenses such as groceries, transportation, utilities, insurance, child care, cable and telephone bills. Example: If you have a $300 monthly car payment and a $100 minimum credit card payment, your monthly debt would be $400.

Down Payment

This is the amount you pay upfront toward your home purchase. A 20% down payment is ideal to lower your monthly payment and avoid private mortgage insurance. Federal Housing Administration (FHA) loans only require a minimum of 3.5%. If you have served in the military, you may be eligible for a down payment of 0% with a VA loan. Similarly, USDA loans provide 0% down payments and low interest rates for rural property purchases. Example: If you're purchasing a home priced at $350,000 and decide to put down 10%, your initial payment would be $35,000.

Loan Program

Mortgage loan programs outline the rules and terms for a mortgage, including interest rates, repayment period, and eligibility criteria for borrowers. They can vary widely, catering to different types of buyers and financial situations. Common loan programs include conventional fixed-rate loans, FHA loans, VA loans, and USDA loans.

Interest Rate

The amount that a lender charges a borrower for taking out a loan. Typically, the interest rate is expressed as an annual percentage of the loan amount. Example: If you take out a loan with a 5% interest rate, you'll pay an additional 5% of the loan amount each year as interest.

Property Taxes

Owning a home means paying yearly property taxes based on the home's assessed value or purchase price, which can affect your affordability. Tax rates differ by location. Our calculator sets a default property tax rate, but you can adjust it in the advanced options. Example: If your property is assessed at $500,000 and the property tax rate in your area is 1.5%, you will pay $7,500 in property taxes annually.

Homeowner’s Insurance

Homeowner's insurance protects against damage to your home and belongings, and covers liability for injuries on your property. It's often required by lenders to get a home loan.

Homeowner's Association (HOA) fees

Residents of most communities are required to pay an HOA fee to their homeowner’s association. You can edit this number in the affordability calculator advanced options. This fee is used for maintaining and improving shared spaces like pools, parks, landscaping, and community buildings, and for enforcing community rules and standards. It can also cover utilities or services like trash removal and snow plowing for the community.

Private mortgage insurance (PMI)

Many lenders commonly require private mortgage insurance if a borrower contributes less than a 20% down payment on a home purchase. PMI protects the lender against potential losses if the borrower fails to repay the mortgage. In our affordability calculator, you have the option to include or exclude PMI through the advanced settings.