This is one of the most common questions asked by all homebuyers. And there is not a cut and dry answer. The truth is it depends on the prospective home buyer(s).
The Differences Between a Mortgage Calculator & an Affordability Calculator
A mortgage calculator will tell you how much a house payment will be per month based on the amount you borrow, length of the mortgage (30 years vs 15 years etc) and if you will escrow your taxes and insurance. Sometimes, if you put down less than 20%, PMI (Primary Mortgage Insurance) will also be added to your payment.
Even though that sounds like a lot, often times house payments are still less than paying rent.
This is similar to what a bank will use to qualify you for a mortgage. These calculators take into account your gross earnings less any liabilities you pay monthly. Liabilities include things such as a car payment, student loans, and credit card payments.
Once you’ve plugged in all the numbers for what you earn and pay out each month, the calculator will determine how much you can spend on a house based on your DTI (debt to income ratio)
What Type of Loans is Best?
There is not a “best” type of loan. There are many types of loans and based on your circumstances your lender can help fit you to the best loan for your circumstance. Some loans have higher DTIs than other. Some have less of a downpayment requirement and some have a no downpayment requirement. There are loans for average credit scores and great credit scores. The credit scores, DTI, and amount of downpayment will all determine what type of loan fits you best.
To truly understand how much you can afford to spend and what type of loan is best for you, ask your Realtor to connect you with some lenders. Even if you will not qualify for a mortgage right now, your agent and a lender can help set you on a path that will make home ownership a real possibility.
To connect with a lender in the greater Bluffton, SC area