function calculateAffordability() {
// 1. Get Input Values
var income = parseFloat(document.getElementById('annualIncome').value);
var debts = parseFloat(document.getElementById('monthlyDebts').value);
var downPay = parseFloat(document.getElementById('downPayment').value);
var rate = parseFloat(document.getElementById('interestRate').value);
var years = parseInt(document.getElementById('loanTerm').value);
var tax = parseFloat(document.getElementById('propertyTax').value);
// Default values if empty
if (isNaN(income)) income = 0;
if (isNaN(debts)) debts = 0;
if (isNaN(downPay)) downPay = 0;
if (isNaN(rate)) rate = 6.5; // Default rate
if (isNaN(tax)) tax = 3000;
// Estimate Home Insurance (approx $800/yr if not provided, but we just use tax input logic for now)
var insurance = 800;
// 2. Logic: The 28/36 Rule
// Front-end ratio: 28% of gross monthly income for housing costs
var monthlyIncome = income / 12;
var frontEndLimit = monthlyIncome * 0.28;
// Back-end ratio: 36% of gross monthly income for housing costs + debts
var backEndLimit = (monthlyIncome * 0.36) – debts;
// The bank will lend based on the lower of the two
var maxTotalMonthly = Math.min(frontEndLimit, backEndLimit);
// Calculate Monthly Taxes and Insurance
var monthlyTaxAndIns = (tax + insurance) / 12;
// Calculate Max P&I (Principal & Interest) available
var maxPI = maxTotalMonthly – monthlyTaxAndIns;
// If P&I is negative, they can't afford anything
if (maxPI < 0) maxPI = 0;
// 3. Calculate Max Loan Amount based on Max PI
// Formula: PV = PMT * (1 – (1 + r)^-n) / r
var r = (rate / 100) / 12; // Monthly interest rate
var n = years * 12; // Total payments
var maxLoan = 0;
if (rate === 0) {
maxLoan = maxPI * n;
} else {
maxLoan = maxPI * (1 – Math.pow(1 + r, -n)) / r;
}
// 4. Calculate Max Home Price
var maxPrice = maxLoan + downPay;
// 5. Update UI
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('maxHomePrice').innerHTML = formatter.format(maxPrice);
document.getElementById('maxLoanAmount').innerHTML = formatter.format(maxLoan);
document.getElementById('monthlyPI').innerHTML = formatter.format(maxPI);
document.getElementById('monthlyTaxIns').innerHTML = formatter.format(monthlyTaxAndIns);
document.getElementById('totalMonthly').innerHTML = formatter.format(maxPI + monthlyTaxAndIns);
// Show results
document.getElementById('results').style.display = 'block';
}
How Much House Can I Afford?
Determining your budget is the first critical step in the home buying process. This Home Affordability Calculator uses the industry-standard debt-to-income (DTI) ratios to estimate a realistic purchase price based on your financial situation.
Understanding the 28/36 Rule
Most lenders use the "28/36 rule" to decide how much to lend you. This rule consists of two thresholds:
Front-End Ratio (28%): Your estimated 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 plus car loans, student loans, credit cards, etc.) should not exceed 36% of your gross monthly income.
Our calculator computes both ratios and uses the lower figure to ensure you remain within a safe borrowing limit.
Key Factors Affecting Your Buying Power
Several variables impact how much house you can afford:
Income vs. Debt: High income helps, but high monthly debt obligations (like a new car payment) will significantly reduce your borrowing power.
Down Payment: A larger down payment reduces the loan amount needed, allowing you to buy a more expensive home for the same monthly payment.
Interest Rates: Even a small increase in interest rates can drastically increase your monthly payment, reducing the total loan amount you qualify for.
Property Taxes: High property tax areas increase your monthly housing obligations, leaving less room for the mortgage principal and interest.
How to Improve Your Affordability
If the results are lower than expected, consider paying down high-interest monthly debts before applying for a mortgage. Additionally, saving for a larger down payment or improving your credit score to qualify for lower interest rates can significantly boost your home-buying budget.