Using the Affordability Calculator

 

There are many great tools available to help you determine how much you can afford.  Make sure that your calculator includes private mortgage insurance, home owners’ association fees, and real estate taxes, as most do not.

The Affordability Calculator is on the home page of this site.

Affordability Calculator Sample Image

To use the calculator, you will need to enter your annual income, the total of your monthly debts (excluding rent), and the amount of your down payment.  You can then use the slider to adjust the monthly budget.

Please note, you will need to make an adjustment for the property taxes.  I have included a list of the tax rates for nearby communities.  You will need to use the “Effective Rate.”

As you perform these calculations, you will need to keep a few things in mind:

DEBT TO INCOME RATIO

Your lender will be looking at the total amount of debt that you have, including your proposed mortgage payment.  For FHA loans, this amount cannot exceed 43%.

HOUSING PAYMENT TO INCOME RATIO

Your lender will also be considering how much of your income would be used to make the proposed housing payment.  This housing payment includes principal, taxes, interest, insurance, plus any home owners’ associations fees.  For FHA loans, this amount cannot exceed 31%.

For example, I have shown two buyers with the same monthly income, both trying to purchase a home with a total monthly payment of $1,500.

Buyer A

Buyer B

Buyer A has an income of $5,000 per month.  They would like to buy a home for $1,500 a month, and they have a car payment of $400.

 

Buyer A has a home payment to income ratio of 30% ($1,500/$5,000)

Buyer A has a debt to income ratio of 38% ($1,900/$5,000)

 

Buyer A can afford this home.

 

Buyer B has an income of $5,000 per month.  They would like to buy a home for $1,500 a month, and have a car payment of $400, student loan payments of $400, and credit card payments totaling $600.

 

Buyer B has a home payment to income ratio of 30% ($1,500/$5,000)

Buyer B has a debt to income ratio of 58% ($2,900/$5,000)

 

Buyer B cannot afford this home.  Buyer B’s maximum monthly housing payment can only be $750 ($5,000 x 43% - $1,400)

 

By determining the monthly payment and your price range, you can begin to shop for homes meeting your needs.


The below table of tax rates are for illustration purposes.  Du Page county uses an assessment ratio of one-third of market value for properties.  These rates do not reflect any special assessments.

City

Tax Rate

Effective Rate

 

City

Tax Rate

Effective Rate

Addison

8.1466%

2.7155%

 

Lombard

8.2998%

2.7666%

Bloomingdale

7.6622%

2.5541%

 

Roselle

7.9645%

2.6548%

Carol Stream

9.2900%

3.0967%

 

Villa Park

7.1967%

2.3989%

Glen Ellyn

7.4050%

2.4683%

 

West Chicago

10.0229%

3.3410%

Glendale Heights

11.2479%

3.7493%

 

Wheaton

7.2429%

2.4143%

Hanover Park

10.2154%

3.4051%

 

Winfield

8.3741%

2.7914%

Itasca

7.5019%

2.501%

 

Wood Dale

7.4409%

2.4803%