Mortgage Calculator: Use our free calculator now

Loan amount. This is the amount you borrowed from the bank or lender, which is essentially the purchase price minus the down payment. Usually, the largest loan you can borrow will correlate with your affordability, i.e., household income.
Down payment. The portion of the purchase price covered by the borrower. Twenty percent is a common percentage that lenders want the borrower to make as a down payment. However, borrowers can put down as little as 3%. For down payments under 20%, the borrower is required to pay private mortgage insurance, or PMI. Usually, the more money you spend on the down payment, the better your interest rate will be—and the more likely you will get approved.
Loan term. The term is the amount of time you have to repay the loan. A typical fixed-rate mortgage comes with 30-, 30-, or 15-year terms. Shorter loan terms (such as 15 or 20 years) usually come with a lower interest rate.
Interest rate. The interest rate is the percentage of a loan charged as a cost of borrowing.

You have used the mortgage calculator above and you want to find out what you can do for a total monthly payment of $500 per month, you will be able to get a mortgage worth $72,553. This, however, is for a loan term of 20 years and an interest rate of 4%. The value of the mortgage you would be able to afford for $500 is of course dependent on variable factors such as the percentages of home insurance and property tax you must pay.

Did you use our mortgage calculator and determine that you could possibly pay your mortgage off quicker? While there are benefits to each of these approaches, it is important to make your choices based on your financial situation and ability to make payments. Here is a breakdown of your options:

Extra payments. With any money you have left over at the end of every month, you can make extra payments on the principal. By paying off the principal more quickly, you will lower the interest you have to pay over the life of the loan.
Bi-weekly payments. In this situation, you pay half of the monthly amount every two weeks. In other words, you would make 26 half payments (or 13 full payments) rather than 12. If you choose this option, make sure your lender will accept bi-weekly payments instead of monthly payments.
Extra monthly payment. This is a good place to put an inheritance or a year-end bonus, for instance. Because half of the interest you pay in a standard 30-year mortgage accumulates in the first 10 years, the sooner into the loan you can do this, the better. The reason is the higher interest rate that comes with the high principal you owe in the earlier years of your mortgage.
Refinance. In this case, you would replace your current mortgage with a new loan. With a new loan term, you could repay your loan more quickly or cut monthly costs. But remember: a shorter loan term will make the mortgage go away faster but will cost you much more in monthly payments.
Recast. If you want to lower your monthly payment, keep your interest rate, and avoid refinancing fees, recasting your mortgage is a good option. Fees for recasting are between $200 and $300 and includes a lump sum payment toward your principal. To reflect the new balance, your lender will then modify your amortization schedule.
Modify. This may mean lowering the interest rate or switching from a fixed-rate mortgage to an adjustable-rate mortgage (or vice versa). Loan medication is usually for anyone who has fallen behind on their payments, usually because of increased living expenses, disability, unemployment, or other loss of income. Remember: there are many different types of loans to choose from.
Other debts. One key to sound money management is to pay off debts that contain higher interest rates first. For example, you could be paying 5% interest in mortgage debt and 18% in credit card debt. If you are struggling with repaying several loans, debt consolidation might be a good option.
Downsizing. This could mean simply purchasing a smaller property or moving to a more affordable area. When shopping for a home, there are some questions worth asking yourself: What is your budget? How much are closing costs? What are the conditions of the home? A trusted real estate agent can help you answer these questions and more.

Most prospective homeowners will be able to get a mortgage that is two to two-and-a-half times higher than their annual gross income. In other words, if you earn $100,000 a year, you should be able to afford a mortgage between $200,000 and 250,000. It should be noted, however, that this is a general rule.

When you are trying to decide on a house, there are a few factors that you will have to consider. One is what your lender thinks you will be able to afford—which is calculated by your gross income, front-end ratio, back-end ratio, and credit score. Another factor is what type of house you want to live in, for how long, and what types of consumption you are willing to give up to afford it.