CALCULATORS / AFFORDABILITY CALCULATOR

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Definitions:

Credit score: A credit score is a measurement of a borrower’s creditworthiness and helps determine their loan terms. It tells a lender how you manage repaying your debt and your likelihood of falling behind on your monthly obligations. Most lenders use the FICO credit scoring model, which ranges from 300 to 850. The higher your score, the more creditworthy they deem you are. 

Down payment: A down payment is a homebuyer’s financial contribution toward the purchase of a home. Depending on your mortgage program, your required minimum down payment can range from 0% to 20%, or more, should your budget allow. Your down payment amount helps determine your loan-to-value (LTV) ratio, or the percentage of the home’s purchase price that will come from obtaining a mortgage loan. 

Home price: A home price is the dollar amount tied to the purchase of a home. It also may be referred to as a listing price and doesn’t take into account property taxes, homeowner’s insurance, interest or other charges. The home price may differ from the appraised value of a home, which is determined by a licensed professional during the home appraisal process. 

HOA dues: If you’re buying a home in a condominium community or planned-unit development, you may belong to a homeowners association (HOA). Participating in an HOA means you may pay monthly dues and abide by association rules related to your home and the surrounding subdivision. You also may enjoy included amenities, such as clubhouse access, landscaping services and a pool.  

Property taxes: Once you buy your home, you’ll have to pay property taxes to your local government based on how much your home is worth and your city/town’s tax rate. Local governments use property tax money to fund schools, roads, police and fire departments and other municipal services. Your property tax can be rolled into your monthly mortgage payment as part of escrow or paid directly to your local government as a property tax bill.

Interest rate: This is how much lenders charge you for borrowing money. In the case of a mortgage, it’s a percentage of your total loan balance that you pay monthly as part of your mortgage payment. How much interest you’re charged depends on how much money you borrow, along with other factors like your credit score and debt-to-income ratio.

Closing costs: These are the fees and expenses you’re charged for closing on your loan once the title of the home is transferred to you. Closing costs are typically 3% to 5% of your loan amount and include charges for originating the loan, your appraisal, title insurance, homeowners insurance, attorney’s fees and other payments associated with preparing your mortgage.

Monthly income: Your monthly income is a key factor lenders assess when deciding whether to lend you a mortgage. They want to know that you have enough cash flow to meet your payment obligations, so that your loan doesn’t go into default. You’ll also want to make sure you have enough income to handle taking on a significant debt like a mortgage.

Monthly debt: Just like lenders evaluate your income, they also assess your current debt load. If you have more debt than income, it may become more difficult to secure a mortgage because it increases the likelihood you won’t be able to repay your loan. Conversely, having a manageable amount of debt in relation to your income can increase your chances for approval because it shows that you can repay debt like a mortgage.