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Affordability Calculator

How much house can I afford?

How much money should I spend on a home? What’s a responsible amount?
A budget is a great place to start. Just plug in your expenses below and see how much house you can afford.
What’s irresponsible when it comes to spending on a home?
Figuring out how much to spend on a home is tricky. The truth is, you can probably afford more than you think in this environment. Figuring out that amount isn’t hard - we can calculate your buying power below with just a few details! Get started now.
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Where your money is going (monthly payment breakdown)

Principal & interest
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Property Taxes
$0
Homeowner's Insurance
$0
Monthly HOA Fee
$0
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How is my buying power calculated?

Many factors go into calculating your buying power - which is unique to you and your situation. Understanding these factors will help you take full advantage of your purchasing power and find homes within that price range. As outlined in the form above, we take into account your location, savings, income, credit score, debts, and expenses when working out your buying power. Interest rates, loan terms and type also impact what you can afford.

Now, let’s break down what your purchasing power will be covering.

There will be two main costs involved in your transaction: down payment and loan costs.

Down payment

To purchase a home, you need a down payment which you’ll pay upfront. Typically, down payments are 3.0% - 20.0% of the total market value of the property - but can sometimes be more.

The amount you’re able to put down in down payment helps determine how big of a mortgage you’ll need. The bigger your down payment, the less you need to borrow from the lender and the less you’ll have to pay in interest. Also, larger down payments usually give you access to more competitive mortgage rates. We breakdown the down payment landscape for a range of loan types here.

Loan costs

Your loan costs will involve origination charges and services.

Origination Charges: The two most common types are “points” and underwriting fees. Points are usually expressed as a % of the loan amount, for instance 0.50%, 1.00%, 2.00%, and so on. Underwriting fees are typically expressed as a fixed $ charge, i.e., $495, $995, $1,495, etc.

Services: This includes two types of services, those the lender will allow you to shop for, and those where the lender picks the vendor. For services you cannot shop for, the lender has to give you an accurate estimate upfront of what those are expected to be. This category includes things such as appraisal fees, credit reports, and other miscellaneous reports that the lender uses for their due diligence. Services you can shop for typically includes the title insurance and related services.
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How much should I put down on my home?

To purchase a home, you need to save for a down payment which you’ll pay at closing to decrease the total size of your loan. They are typically 3.0% - 20.0% of the total market value of the property but can be more.

Nowadays, there are programs that will allow you to put as little as 3% down, and if you opt for this amount, something called mortgage insurance would apply as part of your monthly payment. The only way to waive this insurance is to put 10% or more down. Historically, people have had to put 20% or more down to waive mortgage insurance - so this is a competitive program available to you.

What's going into my closing costs?

Closing costs refer to the costs and fees that the buyers and sellers pay to finalize a transaction. These can include HOA transfer fees, title insurance, recording fees - and more.

As a borrower, you’ll get a loan estimate before your loan goes into process so there are no surprises when finalizing your transaction.

In addition to these, you may also have to pay the following:

Other costs

This will include non-recurring fees associated with the home closing, typically broken out into 4 categories:
  • Taxes and Other Government Fees:

    These vary based on the location of the property.
  • Prepaids:

    These are payments for ongoing expenses that are collected upfront; examples are homeowners insurance, property taxes, interest expenses, and mortgage insurance premiums.
  • Initial Escrow Payment:

    Your loan terms may call for any of your insurance and taxes to be escrowed, meaning the lender will collect these amounts from you directly and then pay them to the appropriate parties. You could be expected to keep 3 months or more of these payments in reserve with your lender.
  • Other:

    An example of this is owner’s title insurance, which is considered optional by most lenders; it protects your equity in the home, whereas the lender’s policy only protects their loan repayment.

Commissions

Most real estate commissions are paid by the seller, so it’s not necessary to include them in your calculations of funds needed to close.

Inspection Costs

It’s recommended that you hire a professional to review the condition of the home and its systems. These reports can cost hundreds of dollars, and may provide an estimate of costs to repair items they have identified, or you may need to get separate quotes from other vendors based on the findings.

Attorney Fees

Depending on your location, you may need to be represented by an attorney in negotiating your purchase agreement and closing.

Seller and Lender Credits

Homebuyers should attempt to negotiate credits from their lender or seller to cover as much of these costs as possible.

How much will I be paying in taxes and insurance?

As a homeowner, you’re responsible for taxes and insurance. These can be paid in one of two ways, depending on your preference.
  1. Directly, where you pay the county assessor and the homeowner’s insurance provider (1-2 times per year).
  2. Or, what most borrowers do, you can opt to roll taxes and insurance costs into your monthly payment and let the loan servicer apply the payments for you.

Which loan types do I qualify for?

Most traditional loans are government backed and typically fall into three categories: conventional, VA, and FHA financing. All great options - especially if you have traditional employment (with pay stubs, a W2).

But what if you’re self employed, or have 1099 income? It can be more challenging to apply for those types of loans withuneven income. TPH ZeroDown Brokerage Inc can help with a few different, non-traditional options and we often work with self-employed individuals to help them get financing. Find more details here and begin the process today.

Next, let’s discuss how your financial profile is used to estimate your buying power.

The debt-to-income ratio is the key formula that is used by lenders to assess how likely you are to be able to afford the payments associated with any debt you borrow.

To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. According to the CFPB, evidence from studies of mortgage loans suggests that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43% percent debt-to-income ratio is a significant cut-off level for many types of mortgages, but you can still find mortgages that allow for debt-to-income ratios as high as 50-55%.
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How to calculate debt to income ratio

The debt-to-income ratio is a way for lenders to assess how likely you are to be able to afford the payments associated with any debt you borrow. To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. According to the CFPB, evidence from studies of mortgage loans suggests that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43% percent debt-to-income ratio is a significant cut-off level for many types of mortgages, but you can still find mortgages that allow for debt-to-income ratios as high as 50-55%.

Here’s how to calculate debt to income ratio:

Gross monthly income

Your gross monthly income is your annual income before taxes divided by 12. You can think of this as the income that shows up on your annual W-2, divided by 12, or the income that shows up on your 1099’s,divided by 12; or if you get paid 2x a month, add up both of those paystubs before taxes are deducted.

Example: If your annual W-2 income is $120,000, then your monthly income is $10,000.

Housing payments (rent, mortgage)

If you rent, this is the amount of your rent payment each month. If you own a home, this is the sum of all your associated monthly payments (principal, interest, taxes, insurance, and HOA).

Example: If your rent is $1,900 then your monthly housing payments is $1,900 OR if your mortgage payment is $1,700, property taxes are $1,200 per year; home insurance is $360 per year and HOA payments are $70 per month, then your monthly housing payment would also be $1,900.

Credit card payment (minimum monthly)

If you use credit cards, this is the minimum monthly payment required by the lender.

Example: You have a $5,000 balance on your credit card; the minimum monthly payment might be $100.

Student loans

If you have a student loan, the monthly payment needs to be included in your total debt payments.

Example: You pay $300 per month on your college loan.

Car (lease, loan)

This is the monthly payment foryour car, which could be associated with a lease or a loan. If your loan or lease will be up within 10 months, and the total remaining payments is <5% of your gross monthly income, then you can exclude this from your debt calculation. This rule applies to other closed-end loans as well (typically student loans or consumer installment loans; not credit cards,which are open-end).

Example: You have 12 months left on your car lease, and the monthly payment is $400 per month.

Consumer installments

An installment loan is a type of loan you repay over time with regularly scheduled payments.

Example: You have a $5,000 personal installment loan with a monthly payment of $130 per month.

Other (alimony, child support, etc)

Example: You’re married with no prior marriage or children. Your other payments are $0.
Using the examples above, your total monthly debt payments would be
$1,900 + $100 + $400 + $300 + $130 = $2,830.
Your gross monthly income is $10,000.
Therefore, your debt-to-income ratio is 28.3%.
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Frequently Asked Questions

Learn everything you need to know about buying a home.

How much mortgage payment can I afford?

A monthly mortgage payment is composed of your monthly payment towards the principal amount of your loan, your monthly payment towards the interest owed on your loan, your property taxes, your homeowner's insurance, your private mortgage insurance (if applicable), any Homeowners Association fees (if applicable), and even home utilities.
With the above in mind, mortgage lenders will assess how much you can borrow based on your credit score, income and debt, and your savings. Interest rates will also impact this amount.
Our free Affordability Calculator helps to identify this amount and helps you build your budget from scratch. Just plug in your expenses below and see how much house you can afford.

How does your debt-to-income ratio impact affordability?

The debt-to-income ratio is a way for lenders to assess how likely you are to be able to afford the payments associated with any debt you borrow. To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. According to the CFPB, evidence from studies of mortgage loans suggests that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43% percent debt-to-income ratio is a significant cut-off level for many types of mortgages, but you can still find mortgages that allow for debt-to-income ratios as high as 50-55%. You can calculate your debt-to-income ratio for free here.

How much house can I afford with an FHA loan?

The amount you can afford to spend on a house with an FHA loan is determined by a few factors. Our free Affordability Calculator helps to identify this by taking into account your location, savings, income, credit score, debts, and expenses when working out your buying power. Interest rates, loan terms, and type (FHA) also impact what you can afford.

Know your options: TPH Digital Mortgages Inc offers many non-traditional options that cater to borrowers who are self-employed or have variable income, and we also provide standard loan products including Conforming Conventional, Jumbo, VA, and FHA. You can choose any loan term you want whether it’s 30 years, 20 years, 15 years or Flex Term. You can learn more by talking to one of our advisors today.

How much house can I afford with a VA loan?

The amount you can afford to spend on a house with a VA loan is determined by a few factors. TPH Digital Mortgages Inc offers many non-traditional options and we also provide standard loan products including Conforming Conventional, Jumbo, VA, and FHA. You can choose any loan term you want whether it’s 30 years, 20 years, 15 years or Flex Term. You can learn more by talking to one of our advisors today.

What factors help determine 'how much house can I afford?'

The factors that determine your buying power are unique to you and your situation. As outlined in the Affordability Calculator above, we take into account your location, savings, income, credit score, debts, and expenses when working out your buying power. Interest rates, loan terms and type also impact what you can afford.

How much can I afford to spend on a house?

The amount you can afford to spend on a house is determined by a few factors. Our free Affordability Calculator helps to identify this by taking into account your location, savings, income, credit score, debts, and expenses when working out your buying power. Interest rates, loan terms and type also impact what you can afford.

How much house can I afford on my salary?

Based on your salary, we can easily determine how much house you can afford in just a few easy steps. Use our free Affordability Calculator above to enter your income, savings, credit score, dets, expenses, and location to get started!

How much house can I afford?

The amount you can afford to spend on a house is determined by a few factors. Our free Affordability Calculator helps to identify this by taking into account your location, savings, income, credit score, debts, and expenses when working out your buying power. Interest rates, loan terms and type also impact what you can afford.

How much should I spend on a house?

The amount you can afford to spend on a house is determined by a few factors. Our free Affordability Calculator helps to identify this by taking into account your location, savings, income, credit score, debts, and expenses when working out your buying power. Interest rates, loan terms and type also impact what you can afford.

What is debt-to-income-ratio (DTI)?

The debt-to-income ratio is a way for lenders to assess how likely you are to be able to afford the payments associated with any debt you borrow. To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. According to the CFPB, evidence from studies of mortgage loans suggests that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43% percent debt-to-income ratio is a significant cut-off level for many types of mortgages, but you can still find mortgages that allow for debt-to-income ratios as high as 50-55%.

What are closing costs?

Closing costs refer to the costs and fees that the buyers and sellers pay to finalize a transaction. These can include HOA transfer fees, title insurance, recording fees - and more.

As a borrower, you’ll get a loan estimate before your loan goes into process so there are no surprises when finalizing your transaction.

What is a down payment?

A down payment is a sum of money you pay upfront at closing towards the home purchase, typically using your savings, gifts from relatives or other sources. It is a portion of the home’s purchase price that is not paid for using a loan.

How does credit score affect your mortgage?

Credit scores help determine whether you qualify for a mortgage loan, and if so, what interest rate the lender will charge you.The higher your credit score, the more house you are likely to be able to afford. Higher credit scores also open the door to a lower interest rate. The more the interest rate, the more you can afford to borrow.

What is property tax?

Property taxes are paid monthly and are very localized. Towns use property taxes to pay for local government services, so each district employs them differently. The property taxes on two similar-sized houses can differ vastly based on a difference of just a few miles. Buying a home somewhere with lower property taxes can save you a lot of money in the long term. The assessed value of your home also affects the amount of property taxes you pay.

What is APR (%)?

The annual percentage rate is a measure of the annual cost of borrowing money, it reflects the interest rate, fees, points, and other charges you pay to get a loan.

What factors impact affordability?

The factors that impact affordability are unique to your situation. As outlined in the Affordability Calculator above, we take into account your location, savings, income, credit score, debts, and expenses when working out your buying power. Interest rates, loan terms and type also impact what you can afford.

The 28% / 36% rule - what is it and why it matters?

The 28/36 rule is in regards to conventional conforming mortgage approval (not government backed).

The basic concept is that you should only be spending 28% of your gross monthly income on housing expenses and only 36% on all debts combined (housing loan, car loan, other loans, credit card, child support, etc).

Most affordable markets for homebuyers?

The 5 most affordable markets for homebuyers are as follows:

  1. Delaware
  2. West Virginia
  3. New Jersey
  4. Nebraska
  5. Mississippi
To discover all 10 states, with median sale prices, read the full list here.

Read more

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