The following are income and savings tests, typically used by mortgage lenders, to determine how much you can afford to spend on a home. You can use this to narrow your dream home search to homes within an affordable price range, or to gain a better understanding of what lenders will look for when you apply for a loan. In addition to these financial tests, credit, employment history and other data will be considered.

For your convenience, our calculator* will automatically estimate how much you can afford based on the tests below.

(*JavaScript calculator requires Navigator 2.02 or Explorer 3.01 or higher)

I. Income Tests

The following are two simple formulas you can use to estimate the home cost you can afford:

A. 28% RULE - Percent of income you can pay for principal, interest, property related taxes and insurance (PITI)

The Federal Housing Administration (FHA) formula, used by many mortgage lenders, is based on FHA findings that most people can afford to spend 28% of their gross monthly income on housing expenses. Housing expenses include principal, interest, property related taxes and insurance (PITI).

     Your monthly gross income    $_________
     Times 28%                    X      28%    
     PITI                         $_________

To give you an estimated affordable loan amount, based on the PITI expenses calculated above, we have provided the following chart, assuming a 30-year fixed mortgage. Please note the monthly payments in the chart include monthly principal and interest (P&I;) only. Therefore, you need to convert your PITI to P&I; by deducting the monthly taxes and insurance (see below). Now, look up your P&I;, or a number close to it, under the prevailing interest rate column in the chart, and read across to the left to find your estimated affordable loan amount.

     PITI -  (as calculated above)        $ __________
     Less: monthly taxes & insurance*     - __________
     Estimated monthly P&I;**              $ __________

---

* If you are looking at a specific property, tax information is available from your sales agent. Insurance costs will vary with specifics of your home and coverage choices. If you are looking at The Malama Group properties, we have provided estimates based on our project information, current Hawaii tax and insurance rates and typical insurance coverage levels. These quotes are based on an average cost for ease of this example.

                             Taxes    Insurance     Total
Westhills at Makakilo         $ 110        $ 130     $ 240
Kua' Aina Ridge at Pukalani   $ 110        $ 100     $ 210
Piilani Village at Kihei      $ 100        $ 100     $ 200	
Sunrise Estates at Hilo       $  85          n/a     $  85

** Check with your sales agent for other monthly payments that may be required. For example, mortgage insurance, if downpayment is 5% or less, and maintenance fees.

Estimated monthly principal and interest chart:

Loan	Interest Rate						
Amount	 7.0%	 7.5%	 8.0%	 8.5%	 9.0%	 9.5%	10.0%
	  - - - - - Monthly Principal & Interest - - - - -						
100,000	  665	  699	  734	  769	  805	  841	  878
150,000	  998	1,049	1,101	1,153	1,207	1,261	1,316
200,000	1,331	1,398	1,468	1,538	1,609	1,682	1,755
250,000	1,663	1,748	1,834	1,922	2,012	2,102	2,194
300,000	1,996	2,098	2,201	2,307	2,414	2,523	2,633
350,000	2,329	2,447	2,568	2,691	2,816	2,943	3,072
400,000	2,661	2,797	2,935	3,076	3,218	3,363	3,510
450,000	2,994	3,146	3,302	3,460	3,621	3,784	3,949
500,000	3,327	3,496	3,669	3,845	4,023	4,204	4,388

B. 36% RULE - Percent of income to pay principal, interest, taxes, insurance and other debt (PITIO)

In addition to the 28% rule, the 36% rule adds consideration for your lifestyle and future plans, i.e., other regular monthly repayments of debt, such as car loans, credit cards and alimony/child support. Thirty-six percent is also considered when pre-qualifying for a loan.

     Your monthly income      $_________
     Times 36%                X      36%    
     PITIO                    $_________

To give you an idea of your estimated affordable loan amount, based on the 36% rule, take the PITIO expenses calculated above less the monthly taxes, insurance and other debt payments you currently have and use the resulting P&I;, or a number close to it, in the P&I; chart (above) to find the maximum loan amount you qualify for. The following worksheet will help you calculate P&I; for the 36% rule:

     PITIO - (as calculated above)      $ __________
     Less: monthly taxes & insurance    - __________
     Less: monthly payments for car,
           credit card & other debt     - __________
     Estimated monthly P&I;              $ __________

II. Savings Test

Before you can take title to your dream home, you will be required to pay, the following costs:

• down payment - percentage varies by mortgage program, typically starting from five percent of the price of the home. If you are buying a home for the first - time, special mortgage programs are available which call for smaller downpayments, such as 0 to 3 percent of the price of the home.
• prepaid expenses - such as property taxes, insurance and interest.
• closing costs - include, but not limited to; attorney's fees, origination fees (points), title fees, escrow fees, survey fees, appraisal fees and recording charges. Approximately 3-4% of the loan amount.

If you have not accumulated enough savings to cover these costs, consider the following resources:

• Money can come from your parents or other relatives
• Look into a FHA or VA loan that require lower down payments.
• Take a loan against your equity in your employer's 401(k) plans, auto or other assets.

100% financing may be available with higher interest rates, if you have excellent credit and good income. You may still need to have cash for prepaid expenses and closing costs.

III. Home Cost You Can Afford

Now that you know the loan amount you can qualify for, and the downpayment you plan to make, you can calculate the home cost you can afford as follows:

     Loan amount you qualify for    $_________
     Plus downpayment               +_________               
     Affordable Home Cost           $_________