1. What is the Fannie Mae Mortgage Affordability Calculator?

Definition: This calculator determines the maximum mortgage principal you can afford based on your monthly payment budget, interest rate, and loan term.

Purpose: It helps homebuyers understand their purchasing power according to Fannie Mae's affordability standards.

2. How Does the Calculator Work?

The calculator uses the present value of an annuity formula:

Where:

• \( P \) — Affordable principal (USD)
• \( M \) — Affordable monthly payment (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Total number of payments

Explanation: The formula calculates the loan amount that would result in your specified monthly payment at the given interest rate and term.

3. Importance of Affordability Calculation

Details: Proper affordability assessment ensures you don't overextend financially and helps set realistic home price expectations.

4. Using the Calculator

Tips: Enter your comfortable monthly payment, current interest rate (default 6.5%), and desired loan term (default 30 years). All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What payment amount should I use?
A: Use your maximum comfortable monthly housing payment including principal, interest, taxes, and insurance (PITI).

Q2: How does Fannie Mae's standard differ?
A: Fannie Mae typically recommends housing payments not exceed 28% of gross monthly income.

Q3: Does this include taxes and insurance?
A: No, this calculates principal and interest only. Add 20-30% to your payment for taxes and insurance estimates.

Q4: What's a typical interest rate?
A: Rates vary, but 6-7% was common in 2023-2024. Check current rates for accuracy.

Q5: Should I use gross or net income?
A: Fannie Mae uses gross income, but personal budgeting should consider net income after taxes.