Question 1

How much home can I afford?

Accepted Answer

A common starting point is the 28/36 rule many lenders use as a guide: your housing payment stays under 28% of your gross monthly income, and your housing payment plus other monthly debts stays under 36%. This calculator starts from the lower of those two limits, takes out property tax, homeowners insurance, HOA dues and mortgage insurance, and works out the loan the rest of the payment supports. Your cash pays the estimated closing costs, and the rest goes on top as the down payment. The result is an estimate for planning, not a pre-approval. A lender looks at your full credit and income picture.

Question 2

How does Avry calculate buying power?

Accepted Answer

First, the most you could put toward housing each month: the lower of 28% of your gross monthly income, or 36% of it minus your monthly debt payments. From that payment come the costs that are not the loan: property tax (a percentage of the price, 2% a year unless you change it), homeowners insurance, HOA dues, and private mortgage insurance (PMI) when the down payment is under 20%. What is left pays principal and interest at your rate and term. Because property tax and PMI depend on the price itself, the price is solved in one step rather than guessed at, so every part of the payment matches the price shown. Your cash pays estimated closing costs first (2% of the price unless you change it), and the rest is the down payment. At least 3% of the price is assumed to be needed as a down payment.

Question 3

How does my down payment affect buying power?

Accepted Answer

Every dollar of down payment adds a dollar to the price you can pay without borrowing more. A bigger down payment also means a smaller loan, which lowers the monthly principal and interest. Your cash also pays the closing costs, so the down payment is what's left after them. At 20% down, private mortgage insurance usually drops away. Crossing that line can raise buying power by more than the extra cash alone, because the monthly PMI charge no longer comes out of your payment. Below about 3% down, most loans are not available, so the calculator shows how much cash you would need first, closing costs included.

Question 4

How do mortgage rates affect what I can afford?

Accepted Answer

A higher rate means more of each monthly payment goes to interest, so the same payment supports a smaller loan. Even half a percentage point changes buying power noticeably, which is why the calculator shows what a lower rate would do. The starting rate is a sample market rate. Use the rate a lender has quoted you for a closer estimate.

Question 5

What is debt-to-income ratio?

Accepted Answer

Debt-to-income ratio (DTI) compares your monthly debt payments with your gross monthly income. The "back-end" ratio includes your future housing payment plus car loans, student loans, credit card minimums and similar debts. Many lenders use 36% as a guide for that total, and the calculator uses it too. If your other debts are high, the 36% limit becomes the one that decides your buying power, and paying a debt down can raise it.

Question 6

What changes if I buy without a buyer's agent?

Accepted Answer

Some sellers are prepared to pay part of a buyer's agent's commission. When you buy without one, that amount can become room to negotiate in the transaction. Avry calls it potential transaction value. It is not money paid to you. Whether it exists, and how it can be used, depends on the seller agreeing, your loan program, your lender's limits and the contract. In a real purchase it might lower the price, pay for a temporary rate buydown, go toward closing costs, or cover repairs the seller completes before closing. The calculator shows what each could look like for your numbers.