Includes Principal, Interest, Taxes, and Insurance based on DTI guidelines.
function calculateAffordability() {
// 1. Get Input Values
var incomeInput = document.getElementById("grossAnnualIncome").value;
var debtsInput = document.getElementById("monthlyDebts").value;
var downPaymentInput = document.getElementById("downPaymentAvailable").value;
var rateInput = document.getElementById("interestRate").value;
var termInput = document.getElementById("loanTermYears").value;
var taxInput = document.getElementById("estAnnualPropertyTax").value;
var insuranceInput = document.getElementById("estAnnualInsurance").value;
var errorDiv = document.getElementById("calcError");
var resultsDiv = document.getElementById("calcResults");
// 2. Parse and Validate Inputs
var grossAnnualIncome = parseFloat(incomeInput) || 0;
var monthlyDebts = parseFloat(debtsInput) || 0;
var downPayment = parseFloat(downPaymentInput) || 0;
var interestRate = parseFloat(rateInput) || 0;
var loanTermYears = parseInt(termInput) || 30;
var annualPropertyTax = parseFloat(taxInput) || 0;
var annualInsurance = parseFloat(insuranceInput) || 0;
if (grossAnnualIncome <= 0 || interestRate <= 0) {
errorDiv.style.display = "block";
errorDiv.innerHTML = "Please enter a valid income and interest rate greater than zero.";
resultsDiv.style.display = "none";
return;
} else {
errorDiv.style.display = "none";
}
// 3. Define DTI Thresholds (standard conservative guidelines)
// Front-end Ratio (Housing costs / Gross Income): typically 28%
var frontEndRatioLimit = 0.28;
// Back-end Ratio (Total debts / Gross Income): typically 36%
var backEndRatioLimit = 0.36;
// 4. Calculate Maximum Allowable Monthly Housing Payment (PITI)
var monthlyGrossIncome = grossAnnualIncome / 12;
// Max housing payment based purely on income (Front-end)
var maxPITI_FrontEnd = monthlyGrossIncome * frontEndRatioLimit;
// Max total debt allowed (Back-end)
var maxTotalMonthlyDebtAllowed = monthlyGrossIncome * backEndRatioLimit;
// Max housing remaining after existing debts are paid
var maxPITI_BackEnd = maxTotalMonthlyDebtAllowed – monthlyDebts;
// The realistic max payment is the lesser of the two ratios
var maxAllowablePITI = Math.min(maxPITI_FrontEnd, maxPITI_BackEnd);
// If existing debts are too high, affordablity might be zero or negative
if (maxAllowablePITI <= 0) {
resultsDiv.style.display = "block";
document.getElementById("resultMaxHomePrice").innerHTML = "$0";
document.getElementById("resultMonthlyPayment").innerHTML = "$0";
return;
}
// 5. Deduct Taxes and Insurance to find Principal & Interest (P&I) portion
var monthlyTax = annualPropertyTax / 12;
var monthlyInsurance = annualInsurance / 12;
var availableForPI = maxAllowablePITI – monthlyTax – monthlyInsurance;
if (availableForPI <= 0) {
// Taxes and insurance eat up the whole budget
resultsDiv.style.display = "block";
document.getElementById("resultMaxHomePrice").innerHTML = "$0";
document.getElementById("resultMonthlyPayment").innerHTML = "Cannot afford P&I after taxes/insurance";
return;
}
// 6. Calculate Maximum Loan Amount working backward from available P&I
// Formula for Loan Amount (PV) = P * [ (1 – (1+r)^-n) / r ]
var monthlyRate = (interestRate / 100) / 12;
var totalPayments = loanTermYears * 12;
// Math.pow(base, exponent)
var discountFactor = (1 – Math.pow((1 + monthlyRate), -totalPayments)) / monthlyRate;
var maxLoanAmount = availableForPI * discountFactor;
// 7. Calculate Max Home Price
var maxHomePrice = maxLoanAmount + downPayment;
// 8. Final Actual PITI Calculation (for display accuracy based on the final home price)
//Recalculate exact PITI based on the derived loan amount to ensure numbers align
var finalPI = maxLoanAmount * (monthlyRate * Math.pow(1 + monthlyRate, totalPayments)) / (Math.pow(1 + monthlyRate, totalPayments) – 1);
var finalPITI = finalPI + monthlyTax + monthlyInsurance;
// 9. Formatting Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0,
});
// 10. Display Results
resultsDiv.style.display = "block";
document.getElementById("resultMaxHomePrice").innerHTML = formatter.format(maxHomePrice);
document.getElementById("resultMonthlyPayment").innerHTML = formatter.format(finalPITI) + " /mo";
}
Understanding Home Affordability and Debt-to-Income Ratios
Determining how much house you can afford is the critical first step in the home-buying journey. This isn't just about how much money you have in the bank for a down payment; it's heavily reliant on your income relative to your debts, known as your Debt-to-Income (DTI) ratio. Lenders use DTI to assess your ability to manage monthly payments and repay money you borrow.
How DTI Impacts Your Borrowing Power
Lenders typically look at two types of DTI ratios when qualifying you for a mortgage:
Front-End Ratio (Housing Ratio): This is the percentage of your gross monthly income that would go toward housing costs (Principal, Interest, Taxes, and Insurance – PITI). A common guideline is that this should not exceed 28% of your gross income. For example, if your household earns $85,000 annually ($7,083 monthly), your maximum housing payment under this rule would be roughly $1,983.
Back-End Ratio (Total Debt Ratio): This is more comprehensive. It includes your proposed new housing payment plus all your other monthly debt obligations, such as car payments, student loans, and minimum credit card payments. Most conventional lenders prefer this ratio to be under 36%, though some loan programs allow for higher ratios.
This calculator uses conservative estimates based on these standard 28%/36% DTI guidelines to provide a realistic picture of what a lender might approve.
Using the Affordability Calculator
To get the most accurate estimate, ensure you are using realistic numbers:
Gross Annual Income: Enter your total household income before taxes are taken out.
Monthly Debts: Sum up the minimum monthly payments on all loans and credit cards. Do not include current rent or utilities.
Taxes and Insurance: These vary significantly by location. Research average property tax rates in your desired area (e.g., 1.2% of home value annually) and typical homeowners insurance costs (e.g., $1,200 annually) for better accuracy.
Next Steps After Calculating
Once you have an estimated maximum home price, you can begin searching within a realistic budget. Remember that this calculator provides an estimate based on standard guidelines. Your actual purchasing power will depend on your credit score, the specific loan type (Conventional, FHA, VA), current interest rates at the time you lock, and lender-specific requirements. The next best step is to get a formal pre-approval from a qualified mortgage lender.