House Affordability Calculator
This house affordability calculator can be used to estimate the amount you can spend on a house based on your annual income. For the best results, please put all your recurring debt in to the monthly debt field. Overall, this calculator is relatively conservative.
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House affordability is a very complex issue depending on your household income, family structure, tax rate, etc. The situation is unique for every household. In the United States and Canada, most lenders follow some commonly accepted guideline to determine your affordability. Normally, the conservative estimation is that the debt-to-income ratio should be lower than 28%. The ratio for the aggressive estimation is 36%. This calculator gives out results based on both ratios. Nevertheless, these are just rough guidelines based on industry standard. It worth to exam your specific situation further before using the results. Generally, we recommend the result of the conservative ratio. Besides household income, other important factors should also be considered are the property tax rate, the income tax rate, and the ratio of your hard spending. If the area of your residency has high property tax rate (such as New Jersey, New Hampshire, etc.) or high income tax rate (such as California, New Jersey, New York City, etc.), you should use the conservative 28% ratio result. If a big portion of your income was spent on fulfilling the basic living, such as food, transportation, etc, you should also use the conservative 28% ratio result.
Besides the calculator above, you can also refer to the Housing Affordability Index to get a sense of house affordability. In the United States the National Association of Realtors publish Housing Affordability Index every month. Please click here for the most recent data.
For those who can not afford a house, rent is normally an alternative option, which is normally cheaper than owning a house. Furthermore, many government authorities, including the U.S. government, and non-profile organizations provide social housing or public housing to provide subsidized assistance for low-income and people living in poverty.
The results of this house affordability calculator are estimation based on industry average. The actually affordability varies case by case.