Zillow "What can I afford?" calculator appears to be bogus (3%, mortgage)
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Says that with 20% down and no debt, I could afford a house that is nearly 8x my before-tax income. Rubbish. 5x would be a stretch. I've noticed that Zillow's estimation of monthly payments is "nicer" than Redfin's.
I think it's very generic with how it determines that and probably gives you the highest amount "possible". What it tells me I could afford and what I KNOW I could afford are different. I wouldn't trust my finances to an app.
The zillow tool seemed pretty accurate to me....but it assumes the 'average' personal debt and expenditure profile.
I found NOLO's calculator more helpful, as it works backwards from how much you want to spend on housing each month...rather than simply how much you earn.
Zillow assumes that everyone wants to spend 30% of their income on housing, I think.
A lot of calculators over estimate so....I agree with Marian and think you are right on the basis for the calculation. Hopefully anyone young and new enough to real estate who believes they can spend what many many calculators out there say has someone providing better advice.
I recently gave realtor.com and trulia short spins but I still like zillow. I like how a zoom in shows the lot lines, I like the way the map works. First thing for me is is the lot and where/how its situation. You have to be careful though because sometimes its not accurate, assuming thats a mistake from where ever its getting the listing from.
Nowadays the real estate and banking industry calculate "affordability" on paying 30% of your income for 30 years, so they gauge more expensive homes as "affordable" than they did when most people got 10 or 15 year loans.
It's in the best interest of the real estate and banking industries to get people to buy the most expensive houses they can afford.
Nowadays the real estate and banking industry calculate "affordability" on paying 30% of your income for 30 years, so they gauge more expensive homes as "affordable" than they did when most people got 10 or 15 year loans.
It's in the best interest of the real estate and banking industries to get people to buy the most expensive houses they can afford.
Sure, they want you to buy as much home as you can. But when did most people take 10 to 15 year loans? There was a time in the 1980s when interest rates were 12 to 18% for a 30 year mortgage and it made sense to take out a 15 year mortgage and the payments weren't increased much.
100k loan at 16% over 30 years = $1345 per month
100k loan at 15.5% over 15 years = 1434 per month
300k loan at 3.75% over 30 years = $1389 per month
300k loan at 3% over 15 years = $2072 per month
With interest rates so low there is a huge difference in payments on a 15 year versus 30 year mortgage.
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