Mortgage Calculator – How much can I afford?

Mortgage calculators can be a great tool for those wishing to understand how much they should be spending on their home payments monthly. 

Table of Contents:

How to calculate a mortgage payment?

How much mortgage can I afford?

How much mortgage can I afford based on income?

How much of a mortgage can I afford based on my salary?

What percentage of my income should go to the mortgage?

How much house can I afford calculator?

How much mortgage can I get approved for?

How much house can I afford calculator?

How much mortgage can I qualify for?

How to calculate a mortgage payment?

Being able to calculate your mortgage payment is essential for determining both its affordability and your ability to make the payments each month. While there are certain mortgage monthly payment calculators, learning how to calculate your monthly payment on your own can be important if you want to have a clearer understanding of what your money is going towards. 

To calculate your monthly mortgage payment, you will need to know the following information. 

1. Principal loan amount (P)

This is the exact amount that you borrowed from the lender for your new home

2. Monthly Interest Rate (i)

To calculate your monthly interest rate, you will need to divide your yearly interest rate by 12. 

3. Months required to pay off the loan (n) 

Based on that set of information you will be able to calculate your monthly house payment by completing the following equation. 

M = P [ i (1 + i) n] / [ (1 + i) n – 1]

How much mortgage can I afford?

A good method of determining the amount that you can afford to take on as a home loan is by following the 28%/36% rule. According to this rule, no more than 28% of your gross monthly income should be spent on home-related costs. These costs relate to not only your mortgage payments but also to your home insurance costs and taxes. The 36% on the other hand refers to the relation between your home debt and other debts. Therefore, according to this rule, your mortgage should not amount to more than 36% of your total debts. By following this rule, you are very likely to get an affordable mortgage. Apart from doing the math yourself and applying this principle based on your situation, you can also use an online affordability calculator to determine whether the house that you are looking to purchase with a mortgage is one that you can afford on your income. 

Some of the factors that will affect how much mortgage you can afford include:

• Your income
• Your savings/ cash reserves 
• Your other debts 
• Your expenses 
• Your credit scores 

Oftentimes all of the above will also be used by your lender to determine whether you should be approved for the mortgage that you are requesting. Therefore, being aware of all of these can help you calculate better the amount that you can borrow for a home without risking your finances. 

How much mortgage can I afford based on income?

There are many different ways of determining the amount that you can afford to borrow on a home loan, but generally, it is advised that your monthly home-related costs, including your mortgage payment, taxes, and insurance, should never exceed 28% of your gross income. Other rules that are often applied to determine the affordability of a mortgage relating to gross income include: 

1. Ensuring that your mortgage is only 2 to 2.5 times more than your gross income. 

2. Make sure that your debt payments in a year, including your mortgage, never exceed 43% of your gross income. 

All of these different rules can also be applied much quicker by using an affordability mortgage calculator and seeing how the math would work out in your specific situation. Normally such calculators are easily accessible and free online. Many banks, financial websites, and real estate websites provide access to their very own calculator. Some of the most well-known ones among those affordability loan calculators include the ones from US Bank, Chase, Zillow, and NerdWallet. 

How much of a mortgage can I afford based on my salary?

Your salary is your main tool for repaying your monthly mortgage payments and as such ensuring that you have taken on an affordable mortgage should be a top priority when looking at what home you would like to purchase. 

Some good principles to follow to ensure that your home is within the realm of affordable include the following: 

1. Ensuring that your home expenses, that is your mortgage payment, insurance cost and taxes do not amount to more than 28% of your gross annual salary

2. Getting a mortgage that is only 2 to 2.5 times more than your gross annual salary. 

While both of these principles will assist you with borrowing from your lender an amount that you can repay, there are other aspects of your budget that you should consider when deciding on the amount that you are willing to borrow. Life expenses and more importantly debts can be incredibly big factors in assessing the amount that you can spend on your mortgage. This is why the following two rules which relate both to your debts and your salary can also help you steer away from getting a home loan that is way above your means. 

1. Ensuring that your mortgage payment does not amount to more than 36% of your total debt. 

2. Ensuring that your total debts don’t exceed 43% of your gross annual income. 

By keeping to the majority of these rules you will be able to ensure that whatever home loan you take on, will be one that you can in the long run afford. Buying a bigger house than what is financially feasible for you can only lead to further problems as you will run the danger of either getting foreclosed on or of being house poor. Since houses go up in value and as your career grows so will your salary, it is much wiser to buy a property that is within your budget and potentially move somewhere else in time than to buy from the get-go a big property that you will be unable to afford in the long run. 

What percent of income should go to mortgage?

The general consensus and recommendation are that you never take on house costs, which include your mortgage payment, taxes, and insurance, that amount to more than 28% of your monthly gross income. This means that if you were making $5,000 per month, your mortgage, that is both principal and interest, your insurance and tax payment should not amount to more than $1,400. According to some people that 28% should also include any HOA payments associated with your property. 

While in general keeping to that 28% is a good rule of thumb you may be willing to adapt that percentage by either lowering or increasing that percentage based on your other expenses and debts. 

How much house can I afford calculator?

With so many percentages associated with determining the affordability of any given home it only makes sense why so many people will resort to using an online calculator to determine the mortgage that they can afford to take on. There are many different loan affordability calculators available online, some of them are created by real estate services, while others are part of financial websites or are offered by large banks. Almost all of them, use similar principles and can provide you with results that are comparable in every aspect. Some of the biggest affordability calculators are offered by: 

• US BankBankrate
• SmartAsset
• Zillow
• NerdWallet
• Chase

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How much mortgage can I get approved for?

Getting approval for a mortgage can be a lengthy process and oftentimes there is a lot of stress included in this process. Before you start looking for lenders you must determine the exact amount that you would like to ask for and to stick to your pre-determined budget even if one particular lender is willing to give you more money. Most mortgage lenders will assess each application based on a variety of factors including: 

• Your income
• Your savings/ cash reserves 
• Your other debts 
• Your expenses 
• Your credit score 

Each one of these factors could dramatically alter the amount that they are willing to lend out, or the interest rate and terms of your home loan. While some lenders stick to the maximum amount of a mortgage being 28% of the borrower’s gross income, there are those lenders who willingly exceed that amount. This means that some lenders will allow you to take out home loans for as much as 30 to 40% of your gross income salary. According to most financial advisors, it is not recommended that you take out such loans as they would far exceed what you can pay on your loan each month, and therefore it will be more likely that you will default on your home payments. 

When looking at what mortgage you can get approved for, apart from looking at the amount that the lender is willing to let you borrow, you should also consider the interest rate that they are willing to give you. In general, you want to get a lender who will give you a low-interest rate, and not necessarily one that is willing to let you borrow well above your means. 

How much house can I afford calculator?

One of the biggest questions to answer when looking to buy a house relates to the total cost that you are both willing and able to spend on your house. While there are many ways of budgeting and determining what you can spend on your mortgage and house, one of the easiest and best ways of determining it is by looking at a mortgage affordability calculator. These calculators are widely available online from many respectable sources and they can provide the answer to how much house you can afford without the need for extensive mathematical equations on pen and paper. Some of the most respectable and easy to use calculators are included in the following list:

• US Bank
• Bankrate
• SmartAsset
• Zillow
• Nerdwallet
• Chase

How much mortgage can I qualify for?

The question of how much mortgage one can qualify for can often be a trap as it is a question that will vary from lender to lender. While many lenders cap the amount that you are able to borrow at maximum debt to income ratio of 28%, some completely disregard that limit by setting the amount that they are willing to let you borrow for up to 30% or 40%. While at first, it may seem like an attractive option to take advantage of the larger mortgage offered, in the long run, it may backfire in the long-run. 

While this may seem counterintuitive to some, for other the reason for this will seem relatively easy to understand. Regardless of what your lender can provide you with, your budget is something that you should know and be aware of. For most people, spending 30% or 40% on just their mortgage will simply end up being unreasonable, and sooner or later they will likely default on their payment as they will be unable to contribute that much towards their home. Therefore, just because you are able to qualify for a mortgage of a certain amount it does not necessarily mean that you should. Instead try to keep to some of the general principles of what your monthly mortgage payment should be, as in the long run that will surely benefit you. 

Summary:

Being able to determine the amount that you can spend on your mortgage comes with a deep understanding of your personal finances, income, and budget. Each person and family have different expenses and debts that they need to tackle and your mortgage is usually only one of the fronts that require your financial attention. To determine what an affordable mortgage in your case would be you can use one of the widely available home loan calculators to see what would mathematically be a good amount to spend on your home, regardless of the amount that you can qualify for.