Behold the new and improved affordability calculator:
Be sure to note the “Extras” tab, where you can adjust the affordability level to your own personal comfort level, plus add in the monthly cost of mortgage insurance if that applies to your situation.
Spend some time with it and let Ross and I know what you think in the comments. Thanks, Ross!
The typical standard for housing payments to be considered affordable is that they not exceed 30% of a one’s gross income. This calculator determines the total monthly payment on principal, interest, taxes, and insurance (PITI) for a fixed-rate mortgage and compares it to 30% of the given income. Payments equaling 30% or less of income are labeled as affordable. The 30% threshold can be adjusted in the “Extras” tab.
Note that if the down payment is less than 20%, the borrower may also be obligated to pay private mortgage insurance (PMI), which can be included in the above calculation by adding the monthly PMI cost in the “Extras” tab. The federal income tax deduction is not included in the calculation, since this “benefit” is typically not a factor in determining affordability.