function calculateAffordability() {
// 1. Get Inputs
var annualIncome = parseFloat(document.getElementById('annualIncome').value) || 0;
var monthlyDebts = parseFloat(document.getElementById('monthlyDebts').value) || 0;
var downPayment = parseFloat(document.getElementById('downPayment').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) || 0;
var loanTermYears = parseInt(document.getElementById('loanTerm').value) || 30;
var propertyTaxRate = parseFloat(document.getElementById('propertyTaxRate').value) || 0;
var annualInsurance = parseFloat(document.getElementById('homeInsurance').value) || 0;
var dtiType = document.getElementById('dtiType').value;
// Basic validation
if (annualIncome <= 0) {
alert("Please enter a valid annual income.");
return;
}
// 2. Determine Max Monthly Payment based on DTI Rules
var monthlyGrossIncome = annualIncome / 12;
var maxHousingPayment = 0;
var maxTotalDebtPayment = 0;
if (dtiType === 'conservative') {
// 28% Front-end (Housing only), 36% Back-end (Total Debt)
maxHousingPayment = monthlyGrossIncome * 0.28;
maxTotalDebtPayment = monthlyGrossIncome * 0.36;
} else {
// Aggressive: usually allows up to 43% total back-end DTI
// We'll set front-end slightly looser at 36%
maxHousingPayment = monthlyGrossIncome * 0.36;
maxTotalDebtPayment = monthlyGrossIncome * 0.43;
}
// Available for housing after existing debts
var availableForHousingAfterDebts = maxTotalDebtPayment – monthlyDebts;
// The limiter is the lower of the two constraints
var maxAllowableMonthlyPayment = Math.min(maxHousingPayment, availableForHousingAfterDebts);
if (maxAllowableMonthlyPayment <= 0) {
document.getElementById('resultsArea').style.display = 'block';
document.getElementById('maxHomePrice').innerText = "$0";
document.getElementById('monthlyPI').innerText = "$0";
document.getElementById('monthlyTaxIns').innerText = "Debt too high";
document.getElementById('totalMonthly').innerText = "$0";
document.getElementById('loanAmount').innerText = "$0";
return;
}
// 3. Reverse Calculate Loan Amount
// Total Monthly = P&I + Tax/12 + Insurance/12
// Tax is a percentage of Home Price (P_home).
// var Loan Amount = L
// P_home = L + DownPayment
// Tax = (L + DownPayment) * (TaxRate/100) / 12
// Insurance = AnnualInsurance / 12
// P&I = L * (r(1+r)^n) / ((1+r)^n – 1) where r = monthly rate, n = months
// This creates a linear equation for L.
// M_max = [L * Factor_PI] + [(L + D) * Factor_Tax] + M_Ins
// M_max – M_Ins – (D * Factor_Tax) = L * (Factor_PI + Factor_Tax)
// L = (M_max – M_Ins – (D * Factor_Tax)) / (Factor_PI + Factor_Tax)
var monthlyRate = (interestRate / 100) / 12;
var totalMonths = loanTermYears * 12;
var factorPI = 0;
if (interestRate === 0) {
factorPI = 1 / totalMonths;
} else {
factorPI = (monthlyRate * Math.pow(1 + monthlyRate, totalMonths)) / (Math.pow(1 + monthlyRate, totalMonths) – 1);
}
var factorTax = (propertyTaxRate / 100) / 12;
var monthlyInsurance = annualInsurance / 12;
var numerator = maxAllowableMonthlyPayment – monthlyInsurance – (downPayment * factorTax);
var denominator = factorPI + factorTax;
var maxLoanAmount = numerator / denominator;
// Edge case: if maxLoanAmount is negative (taxes/insurance eat up whole budget)
if (maxLoanAmount < 0) maxLoanAmount = 0;
var maxHomePrice = maxLoanAmount + downPayment;
// 4. Calculate final components based on Max Loan
var finalMonthlyPI = maxLoanAmount * factorPI;
var finalMonthlyTax = maxHomePrice * factorTax;
var finalTotalMonthly = finalMonthlyPI + finalMonthlyTax + monthlyInsurance;
// 5. Update UI
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('maxHomePrice').innerText = formatter.format(maxHomePrice);
document.getElementById('monthlyPI').innerText = formatter.format(finalMonthlyPI);
document.getElementById('monthlyTaxIns').innerText = formatter.format(finalMonthlyTax + monthlyInsurance);
document.getElementById('totalMonthly').innerText = formatter.format(finalTotalMonthly);
document.getElementById('loanAmount').innerText = formatter.format(maxLoanAmount);
document.getElementById('resultsArea').style.display = 'block';
}
How Much House Can You Really Afford?
Before you start browsing listings or attending open houses, it is crucial to understand your financial purchasing power. This House Affordability Calculator helps you estimate the maximum home price you can manage based on your income, existing debts, and current interest rates.
Key Factors in the Calculation
Gross Annual Income: Your total money earned before taxes. Lenders use this to determine your baseline ability to pay.
Debt-to-Income Ratio (DTI): This is the percentage of your gross monthly income that goes toward paying debts.
Down Payment: The upfront cash you pay toward the home purchase. A larger down payment reduces your loan amount and monthly payments.
Interest Rate: Even a small change in interest rates can significantly impact your buying power over a 30-year term.
Understanding the 28/36 Rule
Financial experts and lenders often use the "28/36 rule" to determine affordability. This rule states that:
Housing expenses (mortgage, tax, insurance) should not exceed 28% of your gross monthly income.
Total debt payments (housing + car loans, student loans, credit cards) should not exceed 36% of your gross monthly income.
Our calculator checks both of these limits and uses the lower number to ensure you don't overextend yourself. If you select the "Aggressive" option, the calculator adjusts the total back-end DTI limit to 43%, which is typically the absolute maximum for Qualified Mortgages in the US.
The Impact of Property Taxes and Insurance
Many first-time buyers focus solely on the mortgage principal and interest. However, property taxes and homeowners insurance are significant components of your monthly payment (PITI). In high-tax areas, these costs can reduce your buying power by tens of thousands of dollars.
This tool automatically estimates these costs and subtracts them from your monthly budget to solve for the actual loan amount you can afford.
How to Improve Your Affordability
If the result is lower than expected, consider these strategies:
Reduce Monthly Debts: Paying off a car loan or lowering credit card balances frees up monthly cash flow for a larger mortgage.
Increase Down Payment: Saving more for the upfront payment directly increases your price range dollar-for-dollar.
Shop for Rates: Improving your credit score can qualify you for lower interest rates, significantly boosting your purchasing power.