Estimate your home buying budget based on income and debt.
30 Years Fixed
20 Years Fixed
15 Years Fixed
10 Years Fixed
Estimated Comfortable Home Price
$0
Monthly P&I$0
Monthly Tax/Ins$0
Total Loan Amount$0
How Is Your Home Affordability Calculated?
When lenders determine how much house you can afford, they primarily look at your Debt-to-Income (DTI) ratio. This calculator uses the standard "28/36 rule." This guideline suggests that your mortgage payment should not exceed 28% of your gross monthly income, and your total debt payments (including the new mortgage) should not exceed 36%.
The Components of Your Budget
Gross Annual Income: Your total earnings before taxes and other deductions.
Monthly Debts: Recurring obligations such as student loans, car payments, and minimum credit card payments.
Down Payment: The cash you have upfront. A higher down payment reduces your monthly loan amount and may eliminate the need for Private Mortgage Insurance (PMI).
Interest Rate: Even a 1% difference in rates can change your purchasing power by tens of thousands of dollars.
Example Affordability Scenario
Consider a household earning $100,000 per year with $500 in monthly debts and a $50,000 down payment. At a 6.5% interest rate on a 30-year term:
The monthly gross income is $8,333. Using the 36% DTI rule, the total allowed debt is $3,000. Subtracting the existing $500 debt leaves $2,500 for the mortgage payment (including taxes and insurance). This results in a purchasing power of approximately $415,000.
Strategies to Increase Your Buying Power
If the result isn't what you hoped for, consider these steps:
Reduce Existing Debt: Paying off a car loan or credit card can significantly increase your DTI headroom.
Improve Your Credit Score: A higher score qualifies you for lower interest rates, lowering your monthly payment.
Save a Larger Down Payment: This directly reduces the loan principal and interest costs.
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById('annualIncome').value);
var monthlyDebt = parseFloat(document.getElementById('monthlyDebt').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseFloat(document.getElementById('loanTerm').value);
var taxRate = parseFloat(document.getElementById('propertyTax').value);
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate)) {
alert("Please enter valid numeric values.");
return;
}
var monthlyGross = annualIncome / 12;
// Applying the 36% DTI Rule (Conservative)
var maxTotalMonthlyPayment = monthlyGross * 0.36;
var availableForMortgage = maxTotalMonthlyPayment – monthlyDebt;
// Estimate Insurance and Property Tax (approx 1.5% of value annually divided by 12)
// To solve for Price (P): Payment = [Loan * i(1+i)^n / ((1+i)^n – 1)] + (Price * TaxRate / 12) + Insurance
// Simplified model: We allocate 20% of the available mortgage budget to taxes/insurance
var monthlyPIBudget = availableForMortgage * 0.80;
var monthlyTaxBudget = availableForMortgage * 0.20;
var monthlyInterest = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// Formula for Loan Amount based on Monthly Payment: L = P * [ (1+i)^n – 1 ] / [ i(1+i)^n ]
var step1 = Math.pow(1 + monthlyInterest, numberOfPayments);
var loanAmount = monthlyPIBudget * (step1 – 1) / (monthlyInterest * step1);
var totalHomePrice = loanAmount + downPayment;
// Update UI
document.getElementById('affordResult').style.display = 'block';
document.getElementById('totalHomePrice').innerText = '$' + Math.round(totalHomePrice).toLocaleString();
document.getElementById('monthlyPI').innerText = '$' + Math.round(monthlyPIBudget).toLocaleString();
document.getElementById('monthlyTax').innerText = '$' + Math.round(monthlyTaxBudget).toLocaleString();
document.getElementById('totalLoan').innerText = '$' + Math.round(loanAmount).toLocaleString();
}