Based on standard conservative DTI ratios (28%/36%).
function calculateAffordability() {
var incomeInput = document.getElementById('macIncome').value;
var debtsInput = document.getElementById('macDebts').value;
var downPaymentInput = document.getElementById('macDownPayment').value;
var rateInput = document.getElementById('macInterestRate').value;
var termInput = document.getElementById('macLoanTerm').value;
var taxInput = document.getElementById('macPropertyTax').value;
var insuranceInput = document.getElementById('macInsurance').value;
var resultDiv = document.getElementById('macResult');
var annualIncome = parseFloat(incomeInput);
var monthlyDebts = parseFloat(debtsInput);
var downPayment = parseFloat(downPaymentInput);
var annualRate = parseFloat(rateInput);
var loanYears = parseInt(termInput);
var annualTax = parseFloat(taxInput);
var annualInsurance = parseFloat(insuranceInput);
if (isNaN(annualIncome) || annualIncome <= 0 || isNaN(annualRate) || isNaN(loanYears)) {
alert("Please enter valid income, interest rate, and loan term values.");
return;
}
monthlyDebts = isNaN(monthlyDebts) ? 0 : monthlyDebts;
downPayment = isNaN(downPayment) ? 0 : downPayment;
annualTax = isNaN(annualTax) ? 0 : annualTax;
annualInsurance = isNaN(annualInsurance) ? 0 : annualInsurance;
var monthlyIncome = annualIncome / 12;
var monthlyTax = annualTax / 12;
var monthlyInsurance = annualInsurance / 12;
// DTI Ratios: Front-end (housing only) usually 28%, Back-end (total debt) usually 36%
var frontEndLimit = monthlyIncome * 0.28;
var backEndLimit = (monthlyIncome * 0.36) – monthlyDebts;
// The lower of the two limits is the maximum allowable total housing payment (PITI)
var maxTotalHousingPayment = Math.min(frontEndLimit, backEndLimit);
// Ensure max payment isn't negative if debts are high
if (maxTotalHousingPayment 0) {
var monthlyRate = annualRate / 100 / 12;
var totalPayments = loanYears * 12;
// Reverse amortization formula to find loan amount from payment
if (monthlyRate === 0) {
maxLoanAmount = maxPIPayment * totalPayments;
} else {
// Loan = Payment * ( (1 – (1+r)^-n) / r )
maxLoanAmount = maxPIPayment * ( (1 – Math.pow(1 + monthlyRate, -totalPayments)) / monthlyRate );
}
}
var maxHomePrice = maxLoanAmount + downPayment;
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('macMaxPrice').innerText = formatter.format(maxHomePrice);
document.getElementById('macMonthlyPayment').innerText = formatter.format(maxTotalHousingPayment);
resultDiv.style.display = 'block';
}
Understanding Home Mortgage Affordability
Before you start attending open houses or browsing listings online, the most crucial first step in the home buying process is determining "How much house can I afford?" A realistic understanding of your mortgage affordability prevents the heartbreak of falling in love with a home that is outside your financial reach and helps you focus your search on properties that fit your budget.
Mortgage affordability is not just about the sticker price of the house. It's a calculation used by lenders to determine how much they are willing to lend you based on your income, existing debts, and the down payment you have saved. This calculator helps estimate that figure using standard industry guidelines.
How Is Affordability Calculated?
Lenders primarily use Debt-to-Income (DTI) ratios to determine your borrowing power. The "28/36 rule" is a common standard used in conventional lending.
Front-End Ratio (28%): This rule states that your total monthly housing costs—including Principal, Interest, property Taxes, and Insurance (often called PITI)—should not exceed 28% of your gross monthly income.
Back-End Ratio (36%): This rule states that your total monthly debt payments—which includes your potential new housing payment (PITI) plus existing obligations like car payments, student loans, and minimum credit card payments—should not exceed 36% of your gross monthly income.
The calculator above determines your maximum housing payment based on the lower of these two limits to provide a conservative and realistic estimate.
Example Scenario
Let's look at a realistic example using the calculator. Imagine a household with a combined annual gross income of $120,000 (which is $10,000 per month). They have accumulated $500 in monthly debt payments (perhaps a car lease and a student loan). They have diligently saved a $40,000 down payment. Assuming a 6.5% interest rate on a 30-year fixed mortgage, with estimated annual taxes of $3,000 and insurance of $1,200, the calculator will estimate their maximum affordable home price is approximately $440,000 to $450,000, keeping their total monthly housing payment around $2,800.
It is highly recommended to get a formal pre-approval from a mortgage lender after using this tool to get a definitive answer on your borrowing capacity.