Method / assumptions / examples
How this calculation works
The result is deterministic: the same measurements always return the same estimate. Here is the relationship and where real-world results can differ.
Formula
Housing cost = principal and interest + taxes + insurance + HOA + PMI
The principal-and-interest payment uses M = P x i x (1 + i)^n / ((1 + i)^n - 1), where P is the purchase price minus the down payment, i is the annual rate divided by 12, and n is the number of monthly payments. Affordability starts with the smaller of the front-end housing budget and the back-end debt budget, subtracts taxes, insurance, HOA, and PMI, then solves the same payment formula backward for principal.
Worked example
Examples
The fixed principal-and-interest payment is approximately $477.42 per month before taxes, insurance, HOA dues, or PMI.
A $85,000 down payment leaves a $340,000 mortgage. At 6.5% for 30 years, principal and interest are about $2,149.48 per month.
The calculator applies both the front-end housing ratio and the back-end total-debt ratio, then shows which one limits the estimated price.
Common mistakes
What to check before using the result
- Keep the principal-and-interest result separate from taxes, insurance, HOA dues, and PMI so you can see which assumption changes the total.
- Use the affordability tab as a budget stress test, not as a preapproval. Lenders can use different income, debt, credit, reserve, and loan-program rules.
- Enter PMI only when it applies. This model keeps PMI constant and does not predict when a servicer may cancel it.
- Compare the cash down payment with closing costs and emergency reserves before treating the maximum price as a target.
FAQ
Frequently asked questions
Why is the total payment higher than principal and interest?
A typical housing payment can also include property taxes, homeowners insurance, HOA dues, and mortgage insurance. The breakdown keeps those estimates visible.
Does this calculate an adjustable-rate mortgage?
No. The schedule assumes the entered rate stays fixed for the full term. It does not model rate resets, interest-only periods, or balloon payments.
Will PMI disappear automatically in the schedule?
No. PMI is held constant because cancellation timing depends on the loan and servicing rules. Set it to zero when comparing a scenario without PMI.
Is the affordable price a lender approval?
No. It is a planning estimate based only on the income, debt, ratio, and cost assumptions shown. A lender may calculate qualifying income and debts differently.