How does Path calculate the home affordability estimate within the Home Planning goal?

Path’s home affordability estimate is based on your projected mortgage eligibility and the impact of cash flows associated with the home purchase on your financial solvency.

We project your mortgage eligibility based on your projected debt-to-income ratio (which includes all linked debts, property taxes and insurance costs), your projected down payment percentage, and on your reported credit score.

Path assumes that a debt-to-income ratio (DTI):

• below 80% of the median value for your state is comfortable
• between the median value on your state and 80% of the median value is manageable
• between 44% and the median value on your state (inclusive) is a stretch
• above 44% is unaffordable

Path bases its estimates of the median debt to income level by state on internal research using historical data on actual mortgage terms.

Path assumes that a down payment:

• above 15% is comfortable
• between 10% and 15% is manageable
• between 5% and 10% is a stretch
• below 5% is unaffordable

Path bases those levels on the distribution of down payments in the U.S. using historical data on actual mortgage terms, in which we observe a low percentage of homeowners obtaining a mortgage with a down payment lower than 5% and a median down payment of 15%.

Your mortgage affordability is based on the worst affordability level across your down payment affordability, your debt-to-income affordability and on whether we project you would run out of money before fully repaying your mortgage on the target home (in which case the mortgage is unaffordable).

In calculating the affordability of the home purchase, Path also considers the impact it has on your other financial goals. It does so by evaluating how the age we project you would run out of money changes (in case you are projected to become insolvent). Path assumes that a home purchase that has no impact on the age you are projected to run out of money is a comfortable purchase as long as you are projected to fully repay your mortgage. In case the home purchase would change the age you would run out of money, Path assumes that a change in that age as compared to your current age below 10% and with a resulting age above 85 is manageable, and Path assumes that a change above 10% or with a resulting age below 85 is stretch. We use age 85 because that’s the median life expectancy for a 65 year old in the United States.

Your plan's overall affordability score is based on the worse of the scores you obtain on the mortgage affordability and on the affordability based on the impact it has on your other goals.

Please see our methodology for more details.