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May 11th, 2010 (Modified on June 4th, 2013)

How Much Home Can I Afford?

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The homebuyer tax credit may be through, but mortgage rates are still enjoying their record-low status. If the expiration of the tax credit hasn’t shattered your dreams of homeownership, now is a great time to buy.

When you begin to ponder the idea of homeownership, you must first ask yourself, “How much home can I afford?”

HSH.com has a mortgage calculator just for that. Our “how much can I afford” calculator can give you an accurate sense of your price range. The calculator is simple and easy to use — just fill in the seven required fields and hit the “Click Here to Calculate” button.

Here’s how the calculator works (I’ll provide some examples):

Annual Income: Simply plug in your household’s yearly income. (ex. $90,000)

Monthly Credit Payments: Here’s the space where you enter in all your monthly bills — i.e. automobile and insurance payments, average credit card payments, student loans, etc. (ex. $1200)

Cash Down Payment: The default setting here is $20,000. Often times $20,000 doesn’t equal a 20% downpayment, and in which case the final calculation will take private mortgage insurance into account. (ex. $20000)

Property Taxes (percentage): The default setting here is 1% (1% = $1000 per year for $100K house). Let’s say you’re looking at a property worth $298,000, with annual property taxes of $6,500. To calculate the percentage of your yearly property taxes (for this calculator’s purposes), divide 298,000 by 6,500. Then, divide 100 into that number. The result is 2.18. (ex. 2.18%)

Property Insurance (percentage): The default setting is 0.5%. Until you really begin looking for a home, it may be hard to estimate what your property insurance will be. For this example, let’s use the default setting. (ex. 0.5%)

Interest Rate: While as of Friday (05/07/10) the 30-year Conforming rate was 5.01%, but to adjust for possible increases and possible adjustments by a lender, 5.25% is a fair interest rate to select. (ex. 5.25%)

Loan Term (in years): The default setting here is 30. The most common loan term on the market is 30 years. (ex. 30)

Based on the examples we provided, here is the amount of home you can afford:

  • House value: $ 285020
  • Loan value: $ 265020
  • Monthly Principal+Interest: $ 1463.45
  • Monthly Prop Tax+Insurance: $ 636.55
  • Down Payment 7.02 %
  • NOTE: Your down payment is less than 20%, so you pay PMI.
    (PMI = Private Mortgage Insurance.)
    That’s an extra 0.5% of your loan each year

  • House value: $ 270488
  • Loan value: $ 250488
  • Monthly Principal+Interest: $ 1383.21
  • Monthly Prop Tax+Insurance: $ 604.09
  • Monthly PMI: $ 112.70
  • Down Payment 7.39 %
  • Don’t forget all those closing costs and points too!

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    2 Responses to “How Much Home Can I Afford?”

    1. Loan Program For School Emplyees : Ryan Davison – Real Estate Property Specialist Says: May 11th, 2010 at 5:00 pm

      [...] How Much Home Can I Afford? (hsh.com) [...]

    2. Two helpful tools that help you sell a home. | Florida Real Estate News Says: May 17th, 2010 at 10:33 am

      [...] How Much Home Can I Afford? (hsh.com) [...]

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    About the HSH Blog

    HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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    Tim Manni

    Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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