Cnn Money Home Affordability Calculator

How to Use This Calculator

To use the home affordability calculator:

1. Enter your gross monthly income before taxes.
2. Enter your monthly expenses (including rent, utilities, food, etc.).
3. Enter your desired down payment percentage (typically 3-20%).
4. Enter your desired loan term in years.
5. Enter your desired interest rate (current average is around 6-7%).
6. Click Calculate to see your maximum mortgage payment and home affordability.

The calculator will show you:

• Your maximum mortgage payment (28% of your income)
• Your maximum total debt payment (36% of your income)
• Your estimated home price you can afford
• Whether you qualify for the home based on your income and expenses

Formula Explained

The home affordability calculator uses the following formulas:

The calculator assumes a 20% down payment unless specified otherwise. The interest rate is based on current mortgage rates, which typically range from 5% to 8%.

Worked Example

Let's calculate home affordability for a person with:

• Gross monthly income: $5,000
• Monthly expenses: $1,500
• Down payment: 10%
• Loan term: 30 years
• Interest rate: 6.5%

Step 1: Calculate Maximum Mortgage Payment

28% of $5,000 is $1,400. Subtract monthly expenses:

$1,400 - $1,500 = -$100

This negative value indicates that with $1,500 in monthly expenses, this person would need to reduce expenses by $100 to qualify for a home.

Step 2: Calculate Maximum Total Debt Payment

36% of $5,000 is $1,800.

Step 3: Estimate Home Price

Using the mortgage formula with a maximum mortgage of $1,400:

Home Price = ($1,400 × 30 × 12) / (1 - (1 + (0.065/12))^(-30 × 12)) ≈ $225,000

This example shows that with $5,000 in monthly income and $1,500 in monthly expenses, this person would need to reduce expenses by $100 to qualify for a $225,000 home.

Interpreting Results

When you use the home affordability calculator, you'll receive several key results:

Maximum Mortgage Payment

This shows the highest monthly mortgage payment you can afford based on the 28% rule. If this number is negative, it means your monthly expenses exceed 28% of your income, and you'll need to reduce expenses to qualify for a home.

Maximum Total Debt Payment

This shows the highest total debt payment (including housing) you can afford based on the 36% rule. If your current debt payments plus your potential mortgage payment exceed this amount, you may need to refinance or reduce other debt.

Estimated Home Price

This shows the approximate price of a home you can afford based on your maximum mortgage payment and the loan terms you entered.

Affordability Status

The calculator will tell you whether you qualify for the home based on your income and expenses. If you qualify, it will show you the estimated home price. If you don't qualify, it will suggest ways to improve your affordability.