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How to use a mortgage affordability calculator Feature Image
Posted on August 11, 2020 5 minute read

How to use a mortgage affordability calculator


What's in this article?

What factors go into determining home affordability?
Next steps in determining how much home you can afford

Can I afford a house? Or, more specifically, can I afford a mortgage? 

If you’re a first time home buyer, these are your top questions. Answering this question can be as easy as using a simple mortgage affordability calculator, like ours below.

However, whenever you’re using a mortgage calculator, it’s wise to know how these calculations work and any personal considerations that might lie outside of the simple mortgage math.

Calculating how much home you can afford requires you to gather some numbers, like your household income, monthly debts (car loans, student loans, credit card payments), and the amount of saving you have for a down payment. These numbers will help you get to a rough estimate of the maximum mortgage loan you might qualify for, but you also need to have a good understanding and comfort level with your monthly mortgage payments.

There are a variety of mortgage affordability rules of thumb, like having three months of mortgage payments in reserve or the 28/36 rule (no more than 28% of your gross monthly income on housing expenses and 36% on total debt). 

Of course, any of these guidelines are meaningless until you know what kind of mortgage you need to buy the house you want.

All of these mortgage calculations and what-if home buying scenarios can get complicated fast. Are you looking for an easier approach? Get the assistance of a professional. One of our by Homefinity loan officers can run all the numbers for any home-buying scenario you might be considering. They’ll get you pre-approved for a mortgage, and you’ll know exactly how much home you can afford. Then you can shop for your home with confidence.

I know some of you are born DIYers, so you’ll want to know all the details behind calculating your mortgage affordability calculation before getting pre-approved. No problem, we love educating our clients about mortgages.

Let’s dig into some numbers and mortgage affordability calculations.

What factors go into determining home affordability?

When determining how much home you can afford, you need to do a simple little budgeting exercise. 

To do this, you need to:

  1. Figure out how much money you make each month (monthly gross income)
  2. Determine how much you have to pay monthly towards current debt (i.e., your car loan(s), student loans, personal loans, and credit cards). 
  3. You need to figure out how much your monthly mortgage payments will be, based on the type of houses you’re considering.

Once you have all your numbers, you simply divide your monthly gross income by the total of all your monthly debt payments plus your new monthly mortgage payment. This simple calculation will provide you with what we call a debt-to-income ratio. 

Your debt-to-income ratio is one of the critical factors that your by Homefinity loan officer will use to determine how much home you can afford. 

I know these numbers can be a little confusing. Don’t worry; your loan officer will walk through all these numbers and calculations step-by-step when you get pre-approved.

Here is a brief glossary of some of the terms we discussed, and your loan officer reference during your pre-approval process.


Most mortgage income calculations begin with your monthly gross income. Monthly gross income is the amount of money that you make each month before taxes or other deductions are taken out.


To qualify you for a mortgage, we will need to know monthly payments that you’re required to pay to other lenders. These are things like your monthly car payment, student loan payments, personal loans, and credit cards.

Reviewing your income and debt is essential for your loan officer. When they qualify you for your mortgage and estimate your new monthly mortgage payment, they can be sure that you can continue to make those monthly payments and have some money left over to enjoy life. 

The mortgage payment that gives you the home you love and allows for the extra margin to enjoy life is the definition of affordability.

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Next steps in determining how much home you can afford

As you can see, one of the big unknowns in determining how much home you can afford is learning the details of your mortgage and that potential monthly mortgage payment. The good news is that deciding what that mortgage payment might be and knowing exactly how much home you can afford is one of the primary purposes of getting pre-approved.

Getting pre-approved for a mortgage is a relatively simple process and can typically be done over the phone, with a licensed mortgage loan officer in about 20 minutes.

After that brief call, you’ll walk away with a mortgage pre-approval and that you and your real estate agent can go house hunting with and make an offer with the confidence you can buy the new home you’ve selected. 

Photo by Charles Deluvio on Unsplash