What Is Buying Power?
Buying Power: The home price your income, debts, savings and credit support at today's rates.
Buying power is the highest home price you can likely afford, based on your income, monthly debts, available cash and credit score, at current interest rates.
How it's calculated
A lender works backward from the largest monthly payment your debt-to-income ratio allows. It subtracts estimated taxes, insurance and mortgage insurance to find the loan amount that payment supports, then adds your down payment.
Example
Income of $9,000 a month, $500 in other debts, and a 45% DTI limit allows $3,550 in total debts, or a $3,050 housing payment. After about $650 for taxes and insurance, $2,400 of principal and interest supports roughly a $360,000 loan at 7%. With $40,000 down, buying power is about $400,000.
Good to know
- Buying power moves with rates. A 1% rate drop can raise it by roughly 10%.
- It's an estimate, not an approval. A pre-approval verifies the numbers.
- Unbeatable shows your buying power from your profile and updates it as rates change.