Based on the 28/36 rule, your maximum monthly mortgage payment is estimated at $0.
Breakdown:
Monthly Income: $0
Max Housing Allowable: $0
Principal & Interest: $0
Taxes & Insurance: $0
Understanding How Mortgage Affordability is Calculated
Determining "how much house can I afford" is the first critical step in the home buying process. This calculator uses the standard debt-to-income (DTI) ratios employed by lenders to estimate your maximum purchasing power.
The 28/36 Rule Explained
Most financial advisors and mortgage lenders use the 28/36 rule to determine affordability:
Front-End Ratio (28%): Your monthly housing costs (mortgage principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
Back-End Ratio (36%): Your total monthly debt payments (housing costs + car loans, student loans, credit cards) should not exceed 36% of your gross monthly income.
This calculator determines your limit based on whichever of these two ratios results in a lower monthly payment, ensuring you don't overextend yourself financially.
Key Factors Affecting Your Buying Power
Several variables can drastically change your affordability:
Interest Rates: Even a 1% increase in rates can reduce your buying power by tens of thousands of dollars because more of your monthly payment goes toward interest rather than principal.
Down Payment: A larger down payment reduces the loan amount needed, allowing you to buy a more expensive home for the same monthly payment.
Existing Debt: High monthly debt obligations (like a large car payment) directly reduce the amount of money available for a mortgage, lowering your back-end DTI ratio limit.
What is Included in "Housing Costs"?
When lenders calculate your front-end ratio, they look at PITI:
Principal: The money paying down the loan balance.
Interest: The cost of borrowing the money.
Taxes: Property taxes charged by your local municipality.
Insurance: Homeowners insurance and potentially Mortgage Insurance (PMI) or HOA fees.
It is crucial to include accurate estimates for taxes and insurance, as these can vary significantly by location and eat into your principal borrowing power.
function calculateAffordability() {
// 1. Get Input Values
var annualIncome = parseFloat(document.getElementById('annualIncome').value);
var monthlyDebts = parseFloat(document.getElementById('monthlyDebts').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var years = parseInt(document.getElementById('loanTerm').value);
var yearlyTax = parseFloat(document.getElementById('propertyTax').value);
var yearlyInsHoa = parseFloat(document.getElementById('insuranceHoa').value);
// 2. Validate Inputs
if (isNaN(annualIncome) || annualIncome < 0) annualIncome = 0;
if (isNaN(monthlyDebts) || monthlyDebts < 0) monthlyDebts = 0;
if (isNaN(downPayment) || downPayment < 0) downPayment = 0;
if (isNaN(interestRate) || interestRate < 0) interestRate = 0;
if (isNaN(yearlyTax) || yearlyTax < 0) yearlyTax = 0;
if (isNaN(yearlyInsHoa) || yearlyInsHoa 0) {
// 6. Calculate Loan Amount using Mortgage Formula solved for Principal
// Formula: P = M * (1 – (1+r)^-n) / r
// M = Monthly Payment (P&I)
// r = Monthly Interest Rate
// n = Total Number of Payments
if (interestRate === 0) {
// Simple division if 0% interest
loanAmount = maxPrincipalAndInterest * (years * 12);
} else {
var r = (interestRate / 100) / 12;
var n = years * 12;
// Math.pow((1 + r), -n)
var discountFactor = (Math.pow((1 + r), n) – 1) / (r * Math.pow((1 + r), n));
loanAmount = maxPrincipalAndInterest * discountFactor;
}
// 7. Total Price = Loan Amount + Down Payment
totalHomePrice = loanAmount + downPayment;
} else {
maxPrincipalAndInterest = 0;
maxTotalMonthlyPayment = 0; // If they can't afford the taxes/debts
}
// 8. Formatting Function
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
// 9. Display Results
document.getElementById('resultDisplay').style.display = "block";
document.getElementById('maxHomePrice').innerHTML = formatter.format(totalHomePrice);
document.getElementById('maxMonthlyPayment').innerHTML = formatter.format(maxTotalMonthlyPayment);
document.getElementById('resMonthlyIncome').innerHTML = formatter.format(monthlyIncome);
document.getElementById('resHousingAllowable').innerHTML = formatter.format(maxTotalMonthlyPayment);
document.getElementById('resPrincipalInterest').innerHTML = formatter.format(maxPrincipalAndInterest);
document.getElementById('resTaxIns').innerHTML = formatter.format(monthlyTaxAndIns);
}