Mortgage affordability calculator information
Our mortgage affordability calculator helps you set budgets, plan your finances and make more informed decisions on your way to homeownership. Let's learn a little more about how to make the most of the calculator and ways to improve mortgage affordability.
How to determine how much house you can afford
Answering "How much house can I afford?" depends on various aspects of your financial situation, ranging from your income to your creditworthiness, to the total costs of borrowing and even your ongoing expenses. Using a percentage of your income can help determine how much house you can afford. For example, the 28/36 rule suggests your housing costs should be limited to 28 percent of your total monthly gross income and 36 percent of your total debt.
The mortgage affordability calculator above can help refine and tailor the estimate of how much house you can afford based on multiple factors. Note that this tool is for demonstration purposes, to help provide an estimate based on available data, and may not fully capture your exact situation. For more specific guidance, consider speaking with a qualified home lending advisor.
Calculating "How much house I can afford?" with the Chase affordability calculator
The Chase mortgage affordability calculator offers two ways of estimating your mortgage affordability, based on either:
- Estimates based on income: If you calculate based on income, the calculator will take information about your financial health and loan preferences, combined with projected taxes and insurance, to provide an estimate.
- Estimates based on monthly payments: If you calculate affordability based on estimated payments, the calculator will ask for information about your desired mortgage, like the maximum monthly payment, term, interest rate and preferred down payment, and combine that with projected taxes and insurance costs.
You might begin by considering your personal financial situation. Do you have a clear idea of how much you can afford to pay per month? If so, the estimated payment amount could be a good starting point. If not, it may be helpful to estimate your mortgage affordability based on current income. Double check your information and note that you can adjust the loan term to see how price, loan amount, down payment and monthly payment might change.
How can a home affordability calculator help me?
The mortgage affordability calculator can potentially help you better understand your mortgage options based on your income, debts, down payment and other financial details. Informed budgeting helps many homebuyers narrow down their search to homes they can afford more comfortably, thereby aiding in financial planning and streamlining the homebuying process. You can also use the mortgage affordability calculator to explore how changes in your financial situation might affect your purchasing power, letting you make more informed decisions about home affordability.
Factors that affect mortgage affordability
The primary factors affecting mortgage affordability are:
- Credit score: A higher credit score indicates higher creditworthiness to lenders and may lead to more favorable loan terms, increasing mortgage affordability.
- Interest rate and loan term: These are major elements of your monthly payments and the overall cost of your loan.
- Cash reserves: Lenders consider the cash reserves you will have after making a down payment when evaluating your ability to handle mortgage debt. Additional funds can help improve lender confidence, potentially improving loan terms.
- Debt-to-income (DTI) ratio: Your DTI ratio plays a major role in shaping your mortgage application, impacting how much lenders might be willing to lend.
- Property taxes and additional fees: Lenders weigh additional costs, such as your property tax, homeowners insurance, and homeowners association (HOA) fees when considering your mortgage affordability.
How can you increase mortgage affordability?
Increasing your mortgage affordability generally begins by assessing your financial situation based on the earlier factors, such as your current debt load, credit score, routine payments and cash reserves. A few ways you might be able to increase your own mortgage affordability are:
- Reducing debts: Lowering your total debt levels before applying for a mortgage improves your DTI ratio, potentially making your application more attractive to lenders.
- Improving credit: A higher score may qualify you for better interest rates, reducing the cost of borrowing. Automating repayments, consolidating debt and taking steps to improve overall credit health is a key first step to possibly enhance the terms of your mortgage.
- Seeking down payment assistance: Some government programs, grants or nonprofit organizations are designed to help fund down payments for eligible homeowners. Qualified borrowers may be able to reduce the total cost of their mortgage and improve overall affordability.
Next steps
Once youāve estimated your mortgage affordability, it might be time to start a preapproval for a mortgage. Preapproval can provide a more tailored estimate of the mortgage amount and terms that a lender may be willing to offer based on your financial profile. In some markets, a preapproval might offer you a competitive advantage by demonstrating to buyers an intent to purchase.
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