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Home Buying Flow

Plan affordability, monthly payment, and long-term cash flow before making an offer.

Get a safe budget range and monthly payment target.

Why this flow matters

Most buyers anchor on a home price, then back into a payment. That is how people end up house-poor. This flow flips it: it derives the safe price from the payment your real income can carry, and stress-tests it against a future rate spike so a refinance or hold-period change does not break your budget.

Diagnosis
On track
Your safe price is $90,000 - inside the 28% rule.
On track

Your diagnosis

Your safe price is $90,000 - inside the 28% rule.

  1. LaterBuild a 6-month emergency fund of $15,000 before closing

    Cash buffer prevents foreclosure on income shocks.

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Your inputs

Edit any value - the diagnosis above updates instantly.

How the math works

The exact rules and formulas this flow applies - no black box.

  • 1.Applies the 28% housing rule: monthly principal + interest stays at or below 28% of gross monthly income.
  • 2.Uses the standard mortgage annuity formula M = P x r(1+r)^n / ((1+r)^n - 1) inverted to back out the safe principal.
  • 3.Stress-tests by recomputing the safe price with the rate plus your buffer (default +1.5%) - if you can still afford it, the deal survives a rate shock.
  • 4.Computes a 6-month emergency fund target from fixed expenses to confirm you have a reserve before closing.

How to read your result

  • Safe home price >= asking price: you can afford it without straining cash flow.
  • Stress-tested price < asking: you are exposed if rates rise. Increase down payment or pick a cheaper home.
  • DTI under 36% is the bank-friendly zone. 36-43% is workable but tight. Above 43% is a red flag.

Common questions

Why 28% and not 30 or 35?

The 28% front-end ratio is the conservative line lenders use for prime mortgages. Going higher works on paper but leaves no room for property tax hikes, repairs, or income shocks.

Does this include taxes and insurance?

No - the safe budget is principal + interest only. Add 1-1.5% of home value per year for taxes + insurance + maintenance to get full PITI.

Why stress-test the rate?

If you go ARM or plan to refinance, you need to survive the worst case. A +1.5% buffer covers most realistic rate scenarios over a 5-7 year horizon.