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 loanTerm = parseFloat(document.getElementById('loanTerm').value);
var estTaxIns = parseFloat(document.getElementById('estTaxIns').value);
// 2. Validate inputs
if (isNaN(annualIncome) || annualIncome <= 0) {
alert("Please enter a valid Annual Income.");
return;
}
if (isNaN(monthlyDebts)) monthlyDebts = 0;
if (isNaN(downPayment)) downPayment = 0;
if (isNaN(interestRate) || interestRate <= 0) {
alert("Please enter a valid Interest Rate.");
return;
}
if (isNaN(loanTerm) || loanTerm <= 0) {
alert("Please enter a valid Loan Term.");
return;
}
if (isNaN(estTaxIns)) estTaxIns = 0;
// 3. Logic: DTI Calculations
// Monthly Gross Income
var monthlyIncome = annualIncome / 12;
// Front-End Ratio (Housing Ratio) – Typically 28%
// Max housing payment (PITI) based on 28% rule
var frontEndLimit = monthlyIncome * 0.28;
// Back-End Ratio (Total Debt Ratio) – Typically 36%
// Max total debt allowed is 36% of income.
// Max housing payment = (36% of Income) – Other Debts
var backEndLimit = (monthlyIncome * 0.36) – monthlyDebts;
// Determine which limit applies (Conservative approach takes the lower one)
var maxTotalMonthlyPayment = 0;
var limitReason = "";
if (backEndLimit < frontEndLimit) {
maxTotalMonthlyPayment = backEndLimit;
limitReason = "Debt-to-Income Ratio (Back-End)";
} else {
maxTotalMonthlyPayment = frontEndLimit;
limitReason = "Housing Ratio (Front-End)";
}
// Ensure result isn't negative if debts are very high
if (maxTotalMonthlyPayment 0) {
// Mortgage Calculation Formula: P = L[c(1 + c)^n]/[(1 + c)^n – 1]
// Inverse to find L (Loan Amount): L = P / ( [c(1+c)^n] / [(1+c)^n – 1] )
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
var mathFactor = (Math.pow(1 + monthlyRate, numberOfPayments) – 1) / (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments));
maxLoan = maxPrincipalAndInterest * mathFactor;
} else {
maxLoan = 0;
maxPrincipalAndInterest = 0;
// If taxes/insurance exceed max payment, they can't afford anything
}
// 5. Calculate Home Price
var maxHomePrice = maxLoan + downPayment;
// 6. Display Results
// Format as Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('maxHomePrice').innerText = formatter.format(maxHomePrice);
document.getElementById('maxLoanAmount').innerText = formatter.format(maxLoan);
document.getElementById('maxMonthlyPayment').innerText = formatter.format(maxTotalMonthlyPayment);
document.getElementById('limitingFactor').innerText = limitReason;
// Show result area
document.getElementById('result-area').style.display = 'block';
}
Understanding Mortgage Affordability
Buying a home is one of the largest financial decisions most people make. Understanding "how much house can I afford" is crucial before starting your search. This calculator uses standard lender guidelines to estimate your maximum purchasing power based on your income, existing debts, and the down payment you have saved.
Key Insight: Lenders look at your gross (pre-tax) income, not your take-home pay. However, you should always create a personal budget based on your net income to ensure you are comfortable with the monthly payments.
The 28/36 Rule Explained
Most conventional mortgage lenders use the 28/36 rule to determine affordability. This rule consists of two debt-to-income (DTI) ratios:
Front-End Ratio (28%): Your estimated monthly housing costs (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 + credit cards, student loans, car loans, etc.) should not exceed 36% of your gross monthly income.
This calculator automatically checks both ratios and limits your affordability based on the stricter of the two. For example, if you have high student loan debt, your "Back-End" ratio will likely reduce your buying power, even if your income is high.
Factors That Impact Your Buying Power
Several variables can significantly change the price of the home you can afford:
Interest Rates: Even a 1% increase in interest 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, lowering your monthly payments and potentially removing the need for Private Mortgage Insurance (PMI).
Property Taxes: High property taxes increase your monthly obligation without adding to your home equity. In high-tax areas, you may qualify for a less expensive home compared to low-tax areas.
Loan Term: Opting for a 15-year mortgage instead of a 30-year mortgage increases your monthly payment, which may reduce the maximum loan amount you qualify for, though it saves significantly on interest over time.
How to Improve Your Affordability
If the result above is lower than expected, consider paying down high-interest monthly debts (like credit cards) to lower your DTI ratio. Alternatively, saving for a larger down payment or waiting for interest rates to stabilize can also improve your position. Always aim to buy a home that fits comfortably within your budget, leaving room for maintenance and emergency savings.