Mortgage Home Loan Affordability Calculator


Please complete the following steps for finding the amount of loan, for which you qualify depending upon the present monthly incomes and loan payments.

  1.  Step 1: Enter the values of your present incomes and payments in the calculator.
  2. Step 2: Enter the values of applicable housing cost ratio and Total debt service ratio. The default values for them are 0.28 and 0.36 respectively, which are applicable for most of the borrowers. If you do not know much about these, then use the default values as given in the calculator.
  3. Step 3: Note the amount, for which you qaulify for the monthly payments, as calculated in the last cell of the part 1 of the calculator.
  4. Step 4: Enter the value of the quilifying amount noted in step 3, in the part 2 of the calculator.
  5. Step 5: Enter the otehr values in the part 2 of the calculator.
  6. Step 6: The part 2 will calculate the maximum amount of loan for which you qualify based upon your affordability.



Explanations to the Affordability Calculator:

Following description will help you to understand the functioning of this home loan affordability calculator.

First Part of the Calculator

The first part of the calculator calculates two numbers, which qualify your ability to pay monthly payments. Whichever is lesser from the two numbers, that is assumed to be your monthly paying capacity to serve the mortgage.

The first qualifying number in the first part calculates your maximum monthly payment assuming you have no long-term debt. It is computed by multiplying your total income by your housing cost ratio and dividing the result by 12. The second qualifying number takes into account your monthly debt payments, applying your total debt service ratio. Mortgage companies usually qualify you for monthly payments no higher than the lesser of the two results. By default, this worksheet assumes a housing cost ratio of 0.28 and a total debt service ratio of 0.36, which are often-used standards for conventional mortgages. If different ratios apply in your case, change the values in the cells.

Second Part of the Calculator

The second part of the debt affordability calculator calculates the amount of a loan you might qualify for with the monthly payment shown above. You have to note the monthly payment qualification amount calculated in the first part and enter that value in the second part of the calculator.

You need to further enter the other values. The second part of the calculator will finally calculate the maximum loan amount for which you qualify.

Depending on the circumstances, some or all of the following will be true:

  • In all cases, your monthly payment will include principal and interest payments.
  • In most cases, it will include a monthly escrow deposit to cover taxes and mortgage insurance, if any. In some cases, homeowner’s insurance is also included in this calculation.
  • If you are buying a condominium or co-op unit, the monthly payment figure may also include your homeowner’s dues and/or maintenance fees.

You will need to estimate these monthly costs and type them into the appropriate cells.

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Lots of approximations and assumptions have been made while developing the calculators.

Please make your own calculations before making any financial decision.