Home Affordability Calculator
Advanced mortgage underwriting tool. Calculate maximum home buying power with precision, accounting for DTI caps, PMI tiers, closing costs, and 50-state tax data.
About
Professional home affordability assessment goes beyond simple multiplication of annual income. It requires a reverse-engineering of the mortgage underwriting process. This tool utilizes the Debt-to-Income (DTI) methodology used by major lenders to determine the maximum loan principal L a borrower qualifies for, while simultaneously solving for the maximum purchase price P based on cash constraints.
Key variables often omitted in basic calculators include Private Mortgage Insurance (PMI), which triggers when the Loan-to-Value (LTV) ratio exceeds 80%, and location-specific Closing Costs, which reduce the liquid cash available for a down payment. This engine solves the following inequality for P:
Formulas
The core solver determines the Maximum Home Price P by finding the minimum of two constraints: the Income Constraint (DTI Limit) and the Cash Constraint (Liquid Savings).
1. Income Constraint (Monthly Payment Limit):
2. Solving for Price P:
Where K is the Mortgage Constant:
Reference Data
| Credit Score | Down Payment % | Est. PMI Rate % | Impact on Buying Power (Example) |
|---|---|---|---|
| 760 + | 5% | 0.38% | High Power (Low Insurance Cost) |
| 720 - 759 | 5% | 0.55% | Moderate Power |
| 680 - 719 | 5% | 0.89% | Reduced Power (-$15k approx) |
| 640 - 679 | 5% | 1.25% | Low Power (-$30k approx) |
| 620 - 639 | 3.5% (FHA) | 0.85% (Fixed) | FHA Fixed Rate Applies |
| Any | 20% + | 0.00% | Maximum Power (No PMI) |