Home affordability calculator
Understanding how much home you can afford is an important first step in the homebuying process. It can help you know how much your mortgage loan will be approved for and it may help influence where you buy, when you buy and what kind of home mortgage loan you apply for.
Use our Home Affordability Calculator to get an idea of how much you may be able to borrow for your home mortgage loan. After you crunch the numbers, if you like what you see, you can start the pre-qualification process and start the homebuying process.
30-year Fixed-Rate Loan:
The payment on a $247,000 30-year Fixed-Rate Loan at 2.99% (3.406% APR) is $1,110.02 for the cost of 2.125 point(s) due at closing and a loan-to-value (LTV) of 92.51%. One point is equal to one percent of your loan amount. Payment does not include taxes and insurance. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.
15-year Fixed-Rate Loan:
The payment on a $247,000 15-year Fixed-Rate Loan at 2.375% (2.858% APR) is $1,677.76 for the cost of 1.875 point(s) due at closing and a loan-to-value (LTV) of 92.51%. One point is equal to one percent of your loan amount. Payment does not include taxes and insurance. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply.
30-year Fixed-Rate VA Loan:
Rate is fixed. The payment on a $247,000, 30-year fixed-rate loan at 2.49% and 92.51% loan-to-value (LTV) is $974.67 with 2.125 Points due at closing. The Annual Percentage Rate (APR) is 2.874%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply. VA loans do not require PMI. The VA loan is a benefit of military service and only offered to veterans, surviving spouses and active duty military.
FHA Loan: Rate is fixed.
The payment on a $247,000, 30-year fixed rate loan at 2.375% and 92.51% loan-to-value (LTV) is $1,122.91 with 2.125 Points due at closing. Payment includes a one time upfront mortgage insurance premium (MIP) at 1.75% of the base loan amount and a monthly MIP calculated at 0.8% of the base loan amount. For mortgages with a loan-to-value (LTV) ratio of 92.51%, the 0.8% monthly MIP will be paid for the first 30 years of the mortgage term, or the end of the mortgage term, whichever comes first. Thereafter, the monthly loan payment will consist of equal monthly principal and interest payments only until the end of the loan. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Some state and county maximum loan amount restrictions may apply. The Annual Percentage Rate (APR) is 3.619%. Assumptions Lenders calculate rates using assumptions: basic loan details. For all rates shown, unless otherwise noted, we assumed: • You’re buying or refinancing a single-family home that’s your primary residence. • If refinancing, you’re not taking cash out. • Closing costs will be paid up front, not rolled into the loan. • Your debt-to-income ratio is less than 30%. • Your credit score is over 720, or 740 for certain jumbo loan options. • You’ll have an escrow account for payment of taxes and insurance. Disclosures • Mortgage rates can change daily. • Some loan options may not be available in all states. • Some jumbo loan options may not be available to first-time home buyers. • Lending services may not be available in all areas. • Some restrictions may apply. • The rate lock period is 45 days.
Assumptions
- Lenders calculate rates using assumptions: basic loan details. For all rates shown, unless otherwise noted, we assumed:
- You’re buying or refinancing a single-family home that’s your primary residence.
- If refinancing, you’re not taking cash out.
- Closing costs will be paid up front, not rolled into the loan.
- Your debt-to-income ratio is less than 30%.
- Your credit score is over 720, or 740 for certain jumbo loan options.
- You’ll have an escrow account for payment of taxes and insurance.
Disclosures
- Mortgage rates can change daily.
- Some loan options may not be available in all states.
- Some jumbo loan options may not be available to first-time home buyers.
- Lending services may not be available in all areas.
- Some restrictions may apply.
- The rate lock period is 45 days.
Several factors are used when calculating how much house you can afford: household income, existing monthly debt payments such as school loans or car payments, and how much you have saved for your down payment.
It's crucial to ensure you savings set aside for unexpected emergencies. Typically, it is recommended to have approximately three months' worth of budgeted mortgage payments as a reserve fund. Even if your monthly household income and expenses remain relatively stable, unforeseen events can arise, affecting your financial capacity to make timely payments. Thus, it's essential to have additional savings allocated specifically for emergencies, separate from the funds earmarked for your home purchase.
To gain a comprehensive understanding of how much home you can afford, your debt-to-income (DTI) ratio plays a vital role. This ratio is determined by comparing your total monthly debt payments to your pre-tax income.
Many lenders recommend that your housing expenses should not exceed 25% to 30% of your monthly income. For instance, if you allocate a monthly mortgage payment of $1,260 (including taxes and insurance) and your monthly income before taxes is $4,500, your DTI ratio would be 28% (1260 / 4500 = 0.28).
Alternatively, you can reverse the calculation to determine your housing budget. By multiplying your income by 0.28, you can find the recommended mortgage payment. Using the example above, this would allow for a mortgage payment of $1,260, resulting in a 28% DTI ratio (4500 X 0.28 = 1,260).
The loan program you choose has a significant impact on the affordability of your home. If you're a member of the armed forces, you may be eligible for a VA home loan, which offers advantages such as lower interest rates, reduced fees, zero down payment, and relaxed qualification criteria. These benefits can help you find a home that fits within your budget without depleting your savings.
As a first-time homebuyer, you may qualify for an FHA loan, which is a government-backed home loan provided by private lenders like Keller Home Loans. FHA loans often have low down payment requirements and offer assistance with loan closing costs. These features make the FHA loan program an appealing choice for eligible homebuyers seeking affordable options.
Your credit score plays a critical role in determining your eligibility for a mortgage. Lenders rely on credit scores to assess your creditworthiness and evaluate the level of risk involved in lending you money. A higher credit score indicates a strong credit history and demonstrates your ability to manage debt responsibly. This, in turn, increases your chances of obtaining a mortgage with favorable terms, including lower interest rates and more flexible loan options. On the other hand, a lower credit score may raise concerns for lenders, as it suggests a higher risk of default or late payments. This could result in a more challenging mortgage approval process, higher interest rates, or even potential rejection of your loan application.
In addition to determining loan approval, your credit score also influences the terms and conditions of your mortgage. Lenders use credit scores to set interest rates, with borrowers having higher scores typically qualifying for lower rates. A lower interest rate can significantly impact the affordability of your mortgage, as it directly affects your monthly payments and the overall cost of borrowing. Moreover, a higher credit score may provide you with access to a broader range of mortgage options and lenders, giving you the opportunity to choose a loan that best aligns with your financial goals. Therefore, maintaining a good credit score is crucial when seeking a mortgage, as it not only opens doors to better loan terms but also saves you money over the life of your mortgage.
A mortgage interest rate refers to the percentage of the loan amount that a lender charges as interest over the life of a mortgage. When you borrow money to finance a home purchase, the lender assesses an interest rate as a fee for lending you the funds. This rate determines the cost of borrowing and is a key factor in determining your monthly mortgage payment. The interest rate is typically expressed as an annual percentage rate (APR) and can vary based on several factors, including your credit score, the loan term, the type of mortgage, and prevailing market conditions. Generally, borrowers with higher credit scores and lower risk profiles are eligible for lower interest rates, while those with lower credit scores may face higher rates. The interest rate directly impacts the total amount of interest paid over the loan term, with lower rates resulting in reduced overall borrowing costs and potentially more affordable monthly payments.