To use a mortgage calculator to determine how much home can be afforded, the following key financial information is typically entered:
- Gross annual or monthly income before taxes
- Monthly debts and expenses (e.g., car payments, student loans)
- Amount available for a down payment
- Estimated interest rate on the mortgage
- Property taxes, homeowners insurance, and HOA fees (if applicable)
The calculator then uses these inputs to estimate an affordable home price and monthly mortgage payment based on common rules such as the debt-to-income (DTI) ratio. For example, many lenders use the 28/36 rule: no more than 28% of gross income should go toward housing costs and no more than 36% toward total debts. Lower interest rates and higher down payments increase affordability. Typically, the process involves:
- Entering income and monthly debts to establish financial capacity.
- Providing a down payment amount to reduce the loan size.
- Inputting local variables like property taxes and insurance.
- Receiving an estimate of maximum affordable home price and monthly payment.
These calculators provide a practical way to know how much mortgage fits comfortably within budget before shopping for a home or talking to lenders.
