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Now it’s time to take action!  Use Credit.com’s Home Affordability Calculator to find out how much home you can afford.

Step-by-Step Guide:


First, open the Home Affordability Calculator in a separate window using Internet Explorer. (You must use Internet Explorer to use the calculator).
Gather the information that you will need to enter into the calculator and write it down. You will need to know your:
  • Monthly income (before taxes)
  • Monthly debt payments (including student loan payments, car payments, and interest on your credit card balance)
  • Cash available for down payment + closing costs
 Follow these steps to calculate your down payment.

1. Ask yourself: What are my available funds? Some sources for these funds might be:

  • Savings
  • Equity in present home and/or other property
  • Investments (present value)
  • Retirement funds
  • Other (e.g., monetary gifts from friends or family)

2. Ask yourself: How much do I need to reserve for retirement, emergencies, education, etc?

Subtract this amount from the available funds you calculated in #1.

This worksheet can help you with your calculations:

Money for DOWN PAYMENT
A. Available funds (assets)
Savings $
Equity in home or other property $
Retirement Funds $
Investments (present value) $
Other (such as personal gifts) $
Subtotal $
Subtract money you would like to reserve for emergencies, retirement, a safety net, etc. $
Subtract estimated closing costs of $3,000 - $3,000
Total $

Note: The calculator automatically includes $3,000 for estimated closing costs, and estimates taxes at 1.5%, and insurance at 0.5% of the purchase price.

Find the current interest rates for a 15 year, and a 30 year fixed mortgage and write them down.

30 year fixed mortgage 6.25%
15 year fixed mortgage 5.85%

Enter your monthly income, other debt, and the 30 year interest rate into the calculator as shown below. Then select “30 Years” for the loan term.

Figure 1: Home Affordability Calculator example image

Next, click on the “Purchase Price Table” tab at the top of the calculator (see below). In the table, find the down payment amount closest to, but less than, the amount you have available for your down payment. In the last column of the same row as your down payment amount the calculator shows the Purchase Price that you can afford!

Figure 2: Home Affordability Calculator example image

Key takeaways:

  1. The amount you can afford to pay for a home depends on your income, the amount you must continue to pay on other debts, the amount of cash you have for the down payment and closing costs, and the interest rates available to you.
  2. The Home Affordability Calculator assumes that you can afford to spend 28% of your income on housing, and 36% of your income on housing + other debts. 28% and 36% are the ratios traditionally used by lenders to determine how much a borrower can afford.
  3. The estimated purchase price that you arrived at using the calculator is not set in stone. A lender will consider other factors and adjust the amount that you can borrow based on your particular circumstances.

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