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Home Affordability Calculator

From vision to mortgage, empowering your homeownership journey

Budgeting Your Dream Home Through Planned Allocations
While Kwai Credit does not offer Mortgage Loans at this time, here is an easy-to-use free online Home Affordability Calculator if you’re in the market for a new house and trying to get an idea of how much you can afford.
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Home Affordability Calculator

How Much Mortgage Can I Afford?

House hunting can already be stressful, so why make the process harder on yourself? Use the free online Home Affordability Calculator below to give you an estimate of how much you can afford by entering just a couple details.
Calculator service provided under license from CALCONIC™. The information provided in the calculator is from CALCONIC, a third-party calculator builder. Kwai Credit has not independently verified the calculations. Consult with a financial advisor or check other sources before making financial decisions.

How to Use the Home Affordability Calculator

Are you a first-time home buyer, or looking for your next home? Either way, the free online Home Affordability Calculator is a useful tool for anyone in the market for a house! First, let’s walk you through what’s needed so you can calculate your estimate.

  • ANNUAL GROSS INCOME

    This is the total amount of money you make in a year, after any taxes are taken out.

  • MONTHLY DEBT

    This is how much you’re spending every month on ongoing expenses such as groceries, credit card bills, student loans, etc. Once you enter these two amounts, the Home Affordability Calculator will generate a recommended estimate of what you can afford for your monthly mortgage payment.

Ways to Calculate What Kind of Mortgage is Best for You

Below are a few of the most popular ways to estimate how much you can afford on a mortgage.

A debt-to-income (DTI) ratio compares a person’s or household’s total monthly debt payments to their gross monthly income. It’s often used by lenders to assess a borrower’s ability to manage additional debt and make loan payments. The DTI ratio is expressed as a percentage and is calculated using the following formula:

DTI Ratio = (Total Monthly Debt Payments / Gross Monthly Income) * 100
Here’s how it works:

Total Monthly Debt Payments: This includes all monthly debt obligations, such as mortgage or rent payments, car loans, student loans, credit card minimum payments, and other outstanding debts.

Gross Monthly Income: This is your total income before any taxes or deductions, such as wages, salaries, bonuses, rental income, and any other sources of income.

For example, if your total monthly debt payments amount to $1,500 and your gross monthly income is $5,000, your DTI ratio would be:

DTI Ratio = ($1,500 / $5,000) * 100 = 30%
In general, a DTI ratio below 36% is considered favorable for most loans, including mortgages. A DTI ratio between 37% and 49% may indicate a moderate level of debt but still be acceptable for some loans. A DTI ratio above 50% suggests a higher level of debt compared to income and may make it challenging to qualify for certain loans.
The 28/36 rule sets limits on the borrower’s debt-to-income (DTI) ratio. This is so that borrowers can comfortably manage their mortgage payments without becoming financially strained. The rule is made up of two components:
  1. Front-End Ratio (28% Rule): This part of the rule states that a borrower’s monthly housing costs, such as the mortgage principal, interest, property taxes, and homeowners’ insurance, should not exceed 28% of their gross monthly income.
  2. Back-End Ratio (36% Rule): The back-end ratio considers all of the borrower’s monthly debt payments, including the mortgage, plus other debts such as car loans, credit card payments, student loans, and any other recurring debts. This total should not exceed 36% of the borrower’s gross monthly income.
Here’s an example of how the 28/36 rule works:

Let’s say a borrower has a gross monthly income of $5,000.

Front-End Ratio (28% Rule): Maximum allowable monthly housing costs = 28% of $5,000 = $1,400

Back-End Ratio (36% Rule): Maximum allowable total monthly debt payments = 36% of $5,000 = $1,800

In this scenario, the borrower’s total monthly debt payments, should not exceed $1,800. This includes their housing costs (including the proposed mortgage payment) that should not exceed $1,400.

Similar to the 28/36 rule, the 35/45 rule sets limits on the borrower’s debt-to-income (DTI) ratio. This is so they can manage their mortgage payments and other financial obligations without becoming weighed down. The rule is made up of two components:

  1. Front-End Ratio (35% Rule): According to this part of the rule, a borrower’s monthly housing costs, such as the mortgage principal, interest, property taxes, and homeowners’ insurance, should not exceed 35% of their gross monthly income.
  2. Back-End Ratio (45% Rule): The back-end ratio, similar to the 28/36 rule, takes into account all of the borrower’s monthly debt payments, including the mortgage, plus other debts like car loans, credit card payments, student loans, and any other recurring debts. This total should not exceed 45% of the borrower’s gross monthly income.
Here’s an example of how the 35/45 rule works:

Assuming a borrower has a gross monthly income of $6,000:

Front-End Ratio (35% Rule): Maximum allowable monthly housing costs = 35% of $6,000 = $2,100

Back-End Ratio (45% Rule): Maximum allowable total monthly debt payments = 45% of $6,000 = $2,700

In this scenario, the borrower’s total monthly debt payments, should not exceed $2,700. This includes their housing costs (including the proposed mortgage payment) that should not exceed $2,100.

The 25% after-tax rule is a guideline that suggests allocating no more than 25% of your after-tax monthly income toward your mortgage payment. This rule is intended to help individuals and families manage their mortgage payments while also having enough funds for other essential expenses and financial goals.

Here’s how the 25% after-tax rule works:

Calculate After-Tax Income: Start by determining your monthly after-tax income. This is the amount you receive after deducting taxes from your gross income.

Calculate Maximum Mortgage Payment: Multiply your after-tax income by 25% to find the maximum amount you should allocate toward your mortgage payment, including principal, interest, property taxes, and homeowners’ insurance.

For example, if your after-tax monthly income is $4,000:

Maximum mortgage payment = 25% of $4,000 = $1,000

This rule suggests that your mortgage payment should not exceed $1,000 per month based on your after-tax income.

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Frequently Asked Questions

Financial Kwai Credit for Home Improvement Expenses: What to Know
To budget for a mortgage, assess your monthly income and expenses. Allocate a portion of your income for the mortgage payment while considering other essential expenses, savings, and debt payments. Consider using budgeting tools to track your finances and see if you can comfortably afford your mortgage, like the free online Budgeting Calculator.
You can calculate your monthly mortgage payments using the free online Mortgage Calculator. Input a few details to estimate your principal and interest payment, as well as your total monthly payment. Remember to add property taxes, homeowners’ insurance, and possibly private mortgage insurance (PMI) if your down payment is less than 20%.
Start by setting a savings goal for your down payment. Create a dedicated savings account and contribute regularly. Consider cutting unnecessary expenses, increasing your income, and taking advantage of windfalls like tax refunds. You could also look into down payment assistance programs and explore options for reducing discretionary spending.
Buying a house will likely be the most expensive purchase you’ll make in your life, so it’s important to understand what costs are included. Homebuying costs include the down payment, closing costs (which can include appraisal fees, title insurance, attorney fees, etc.), property taxes, homeowners’ insurance, and possibly private mortgage insurance (PMI). Additionally, there are costs for home inspections and potential repairs.
To get pre-approved for a mortgage, contact lenders and provide financial information, including income, assets, and debt. They’ll evaluate your credit score, financial history, and other factors to determine the loan amount you’re eligible for. A pre-approval letter can also help you understand your budget better.
Some ways to afford a house include saving for a down payment, improving your credit score, managing and reducing existing debts, increasing your income through side jobs or career advancement, exploring first-time homebuyer programs, and being strategic about the type of house you’re looking for.
Existing debts can impact your mortgage eligibility by affecting your debt-to-income ratio. Lenders prefer a lower ratio, so having excessive debt payments relative to your income might limit your borrowing capacity. Paying down debts, improving your credit score, and managing your financial obligations might positively influence your mortgage eligibility. If you’re trying to pay off your debt, consider using the free online Debt Repayment Calculator. This tool could help you strategize a path toward a debt-free future.
To qualify for a mortgage loan, lenders assess your financial stability, creditworthiness, and ability to repay the loan. Factors considered include your credit score, income, employment history, debt-to-income ratio, down payment, and more. Meeting these criteria can demonstrate your ability to manage mortgage payments.
The credit score needed for a mortgage loan varies, but a higher credit score might improve your chances of qualifying for better rates. Generally, a score of 620 or higher is often required for conventional loans, while FHA loans may accept lower scores around 580. However, higher scores typically offer more favorable terms.
A fixed-rate mortgage is a type of home loan where the interest rate remains constant throughout the loan term. This provides predictability and stability in monthly payments. So, it’s a popular choice for borrowers who want consistent payments over the life of the loan.
An adjustable-rate mortgage (ARM) is a type of mortgage where the interest rate is initially fixed for a certain period (often 5, 7, or 10 years) and then adjusts periodically. ARM loans may have lower initial rates but carry the risk of rate fluctuations after the initial period.
Mortgage points are fees paid upfront to lower the interest rate on the loan. Each point typically costs 1% of the loan amount and can lead to lower monthly payments.
Private mortgage insurance (PMI) is a type of insurance required for homebuyers who make a down payment of less than 20% on a conventional mortgage. PMI protects the lender in case the borrower defaults. It adds to the monthly payment but allows borrowers to access a mortgage with a lower down payment.
A mortgage pre-approval is a lender’s assessment of your creditworthiness and capacity to borrow. It involves providing financial documents to the lender, who then determines the loan amount you’re eligible for. A pre-approval letter can strengthen your offer as a serious buyer and helps you understand your budget.
FHA (Federal Housing Administration) and conventional loans are two common types of mortgage loans. FHA loans are government-backed and require lower down payments and lower credit scores, but they come with mortgage insurance premiums. Conventional loans typically require higher credit scores and larger down payments but offer more flexibility in terms.
A larger down payment reduces the loan amount, which can lead to lower monthly payments and potentially better interest rates. It also influences whether you need to pay private mortgage insurance (PMI). A larger down payment can demonstrate financial stability and commitment to the purchase.
Kwai Credit does not provide financial advice. The content of this page is provided for general informational purposes only. Kwai Credit  does not make representations and warranties with respect to any information from this page, including Home Affordability Calculator results. Consult with a financial advisor and evaluate the risks and merits before making financial decisions.
High-interest loans can be expensive and should be used only for short-term financial needs, not long-term solutions. Customers with credit difficulties should seek credit counseling.