What’s the best way to tell if you can afford that home? Right — find a mortgage calculator online. But, wait. Are you getting the right answer from that calculator? Worse, do you even have the right information to get that calculator to work for you?

Most mortgage calculators will ask you how much you want to spend on the mortgage. But do you really know that yet? Sure, you may be standing in front of your dream house, gaping at the price advertised on the flyer in the front yard, so you know how much you want to spend.

Is the best way to find how much home you can afford really starting with the “mortgage amount”?

Sure, you could plug home prices into those calculators all day long, and then get sticker shock at the monthly mortgage payment. Worse, you’ll be taking a best guess at the interest rate, term and type of loan, since most calculators make you fill this stuff in.

How should you really figure out how much home you can afford?

Start with how much you want to spend on housing. Most budgets call for earmarking 28% of your income for housing. Be careful here! By “housing,” these budget experts are assuming you’re including your homeowner’s insurance and taxes! That gives you a lot less than you think for your mortgage. Also, if you don’t put 20% down on that home, tack on private mortgage insurance (PMI) on top of that.

It sounds easy enough to multiply your after-tax income by 0.28 and come up with a number. For example, you may have $60,000 each year in post-tax income, which gives you $16,800 to spend on housing each year. Divide that by 12 and you have $1,400 each month for your mortgage, insurance, taxes and utilities.

But you don’t know if a 30-year fixed at 6.25% will give you that payment. More importantly, you still don’t know if you can buy that house. You still need more information.

Look for a mortgage calculator that will give you an answer, rather than asking more questions. A good mortgage calculator should allow you to provide as little information as possible, and give you the full answer. You should be able to enter your monthly payment and let the calculator tell you how much you can borrow to buy that home.

Here are a few suggestions:

There is no replacement for talking to a mortgage expert about all the costs to consider when deciding if that home is affordable. But, if all you need is a rough estimate to scope out a neighborhood, make sure you’re using the right mortgage calculator.

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