Determine how much house you can realistically afford based on your income and debts.
Estimated Affordable Home Price:
Estimated Monthly Payment (PITI):
Calculated Logic: This estimate uses a 36% Debt-to-Income (DTI) ratio, which is a standard conservative guideline for lenders. It includes estimated property taxes and homeowners insurance.
Understanding Home Affordability
Buying a home is the largest financial commitment most people ever make. To determine "how much house you can afford," lenders primarily look at your Debt-to-Income ratio (DTI). This calculator helps you see through the eyes of a mortgage underwriter.
The 36% Rule
Most traditional financial advisors recommend that your total monthly debt payments—including your new mortgage, car loans, student loans, and credit cards—should not exceed 36% of your gross monthly income. This is often called the "back-end ratio." Some loan programs (like FHA) allow up to 43% or even 50%, but staying at or below 36% ensures you have a "safety buffer" for maintenance and lifestyle expenses.
Key Factors That Influence Your Budget
Interest Rates: Even a 1% change in interest rates can shift your buying power by tens of thousands of dollars. Higher rates mean more of your monthly payment goes to the bank rather than the principal.
Down Payment: A larger down payment reduces the loan amount you need and may help you avoid Private Mortgage Insurance (PMI), which adds to your monthly cost.
Property Taxes & Insurance: These vary significantly by location. A $400,000 home in Texas might have a much higher monthly payment than a $400,000 home in Arizona due to property tax rates.
Realistic Example
Imagine a couple earning $100,000 per year ($8,333/month). If they have $500 in monthly car payments and $40,000 saved for a down payment at a 6.5% interest rate:
Maximum total debt allowed (36%): $2,999.
Subtracting existing debt ($500): $2,499 remains for the mortgage (PITI).
Accounting for taxes and insurance (~$450/month): $2,049 remains for Principal and Interest.
With these numbers, they could afford a home priced at approximately $365,000.
function calculateHomeAffordability() {
var grossIncome = parseFloat(document.getElementById('grossIncome').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(grossIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(taxRate)) {
alert("Please enter valid numbers in all fields.");
return;
}
// 1. Calculate Monthly Gross Income
var monthlyGross = grossIncome / 12;
// 2. Max Total Monthly Debt (using conservative 36% DTI)
var maxTotalMonthlyDebt = monthlyGross * 0.36;
// 3. Max Monthly PITI (Principal, Interest, Taxes, Insurance)
var maxPITI = maxTotalMonthlyDebt – monthlyDebt;
if (maxPITI <= 0) {
document.getElementById('totalHomePrice').innerHTML = "Ineligible";
document.getElementById('monthlyPI').innerHTML = "Existing debt exceeds 36% DTI";
document.getElementById('affordResults').style.display = "block";
return;
}
// 4. Estimate Taxes and Insurance (Simplified approximation)
// We iterate or solve for Price where PITI = P&I + Tax + Insurance
// Insurance usually ~ $100/mo for a standard home
var monthlyInsurance = 100;
// Monthly interest rate
var r = (interestRate / 100) / 12;
// Number of payments
var n = loanTerm * 12;
// Monthly Tax Coefficient
var mTax = (taxRate / 100) / 12;
// Formula: MaxPITI = [Loan * (r(1+r)^n)/((1+r)^n -1)] + [HomePrice * mTax] + Insurance
// Since Loan = HomePrice – DownPayment
// var MFactor = (r(1+r)^n)/((1+r)^n -1)
var mFactor = (r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1);
// Solve for HomePrice:
// maxPITI – Insurance = (HomePrice – DownPayment) * mFactor + HomePrice * mTax
// maxPITI – Insurance + (DownPayment * mFactor) = HomePrice * (mFactor + mTax)
var numerator = (maxPITI – monthlyInsurance) + (downPayment * mFactor);
var denominator = mFactor + mTax;
var homePrice = numerator / denominator;
if (homePrice < downPayment) {
homePrice = downPayment;
}
// Results formatting
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('totalHomePrice').innerHTML = formatter.format(homePrice);
document.getElementById('monthlyPI').innerHTML = formatter.format(maxPITI) + " / month";
document.getElementById('affordResults').style.display = "block";
}