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Purchase A Home Tool
The Purchase A Home tool helps you estimate the monthly payment you can afford and then the total purchase price of a home based on that payment and your down payment. This is accomplished by considering your present income and debt payments.
As fun as it is to dream big and look at really nice homes, eventually reality sets in and you must go through the drudgery of determining how much home you really can afford. By using this tool, you will know ahead of time exactly how much home you can afford. You can also create a range of affordable home values based on a range of mortgage interest rates.
Begin by entering your gross (before taxes) monthly income. Also enter the total of any debts that you pay each month. Be sure to include credit card payments, consumer loans, student loans, business loans, alimony and child support if applicable.
Based on the industry standard guidelines of 28% and 36%, your monthly mortgage payment can be the greater of 28% of your gross income or your mortgage payment and your debt payments can be up to 36% of your gross income. The less monthly debt you have, the more you can afford to pay in mortgage payments.
The second part of this tool helps you determine the value of the home you can afford. This value can be determined based on the amount you can afford to pay each month, the percentage of your monthly payment that will go toward non-mortgage expenses like property tax and insurance, the amount of down payment you make and the interest rate of the loan.
As the percentage of your monthly payment for property taxes and insurance goes up, the amount of home you can afford will go down because your entire monthly payment is not going toward the home. As the percentage of down payment increases so does the amount of home you can afford because you are paying a larger portion of the total home price up front.
Because it is often difficult to determine a fixed interest rate before you actually close on the mortgage, you may view or print a range of home prices based on a range of interest rates. Just enter the starting and ending interest rate range values and the amount the values should be incremented. Select the "View" or "Print" buttons to view or print the home value ranges.
The five Scenario buttons allow you to create multiple scenarios using different values. Each scenario
may be printed for future reference and comparison. Only information for the currently selected calculation method will be printed.
When you select the Print Scenarios button the following window appears:
Check the box next to each completed scenario that you want to print then select the View or Print button.
Next: Tips
Click on a button above to learn more about the tool.
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