Mortgage Purchase Budget Calculator

As a prospective homeowner, you'll want to decide your monthly payments. Our purchase budget calculator considers a few key factors, including your household income, monthly debts (such as auto and student loan payments), and the down payment to determine how much you can afford.

Purchase Calculator

Becoming a homeowner is a dream-come-true milestone for many people, but the journey to homeownership can be challenging. It’s an exciting yet often overwhelming process, with much of the stress coming from understanding the financial aspects. That’s why we created the Purchase Calculator.

A purchase calculator lets you easily estimate your home purchasing power. Whether you're buying a home for the first time or investing in real estate, the calculator can help you get a clear picture of the financials so that you can make confident decisions.

Take the guesswork out of your home-buying process with the mortgage affordability calculator. Make informed choices and take the first step toward your new home with confidence using our easy-to-use Purchase Calculator.

How much mortgage payment can I afford?

As a general rule of thumb, the mortgage you can afford is about 2x to 2.5x of your gross annual income. For instance, if you earn $100,000 annually, you can afford a mortgage worth $200,000.

The monthly mortgage payment has four main components - the principal amount, the applicable interest rate, property tax rate, and insurance. The general guideline is that your monthly mortgage payment should not go beyond 28% of your gross monthly income, while your total debt payments should stay below 36% of your income. This is often referred to as the 28/36 percent rule.

When calculating monthly mortgage payments, you need to consider the following mortgage affordability factors:

• Income
• Down payment savings
• Lifestyle choices
• Current debts

With the help of Total Mortgage’s Purchase Calculator, you can correctly calculate your monthly mortgage payments. Keep in mind that there could be unexpected costs or hidden costs, such as maintenance, last-minute repairs, and potential HOA fees.

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

The debt-to-income ratio (DTI) is one of the most critical mortgage affordability factors. It is a key metric that measures the percentage of your income used to pay off debts monthly, such as credit card bills, auto loans, student loans, and similar obligations. You can make use of an online DTI calculator to determine your ratio quickly.

Lenders use this ratio to understand your ability to manage the additional financial responsibility of mortgage payments.

A lower DTI indicates better financial health, improving your probability of qualifying for a larger loan amount with favorable terms. Most lenders in the US prefer a DTI lower than 43%.

What is the maximum house price I can afford with an FHA loan?

Our Purchase Calculator can help calculate home affordability for an FHA loan. The maximum house price varies from place to place. In 2024, it ranges between $498,257 and $1,149,825 in high-cost areas.

FHA loans require a minimum down payment of 3.5% when the credit score is 580 or more. If your credit score is lower or you are a first-time homebuyer, you might have to make a down payment of 10%. The FHA loan availability factors are the buyer’s income, debt-to-income ratio, applicable FHA loan limits in your region, and your credit score.

What is the maximum house price I can afford with a VA loan?

Veterans, active-duty service members, and their families can use VA loans to buy a home. There are several benefits, but the most attractive ones are zero down payment and the absence of private mortgage insurance (PMI).

The maximum house price you can afford with a VA loan depends on key VA loan affordability factors such as your income, DTI ratio, credit score, entitlement benefits, and more. While there are no official loan limits, mortgage lenders may impose limits based on your financial qualifications and local property values.

What factors affect the kind of home I can afford?

Lenders look at some key mortgage affordability factors before approving a home loan. Here are the primary considerations:

• Gross Income: The most important parameter. It is the amount you earn before taxes and deductions. Lenders will consider your base salary, bonus, part-time earnings, self-employment earnings, alimony, child support, Social Security benefits, disability, etc. to determine your borrowing capacity.
• Mortgage-to-income Ratio: Also known as the front-end ratio, it decides your monthly mortgage payment as a percentage of your annual gross income. Lenders typically prefer a front-end ratio below 28%.
• Debt-to-Income Ratio (DTI): Also known as the back-end ratio, it is the ratio of your debts to your gross income. This includes other loans, credit card payments, and child support. Lenders in the U.S. generally consider a DTI below 43% ideal. Use a debt-to-income calculator for a quick calculation.
• Borrower’s Credit Score: Your credit score reflects your financial history and determines the interest rate you’ll be offered. A low credit score typically results in higher interest rates, while a higher score can secure better terms. Maintaining a strong credit score is essential to getting the best mortgage deal.
• Down Payment Amount: The amount home buyers must pay upfront when buying a house. A higher down payment means that the monthly payments are lower. This helps you get a better interest rate. In most cases, the standard down payment amount is about 20% of the mortgage amount.
• Expenses: Current monthly expenses such as credit card bills, health insurance premiums, taxes, pre-tax retirement contributions, FICA deductions, student loans, and utilities also impact how much you can afford to pay as mortgage payments monthly.

Looking to consult with the best loan specialists? Contact us at Total Mortgage.

Ref: Rocket Mortgage, Bankrate, Rocket Mortgage VA Loan