function calculateAffordability() {
// 1. Get Inputs
var incomeInput = document.getElementById('mac_income');
var debtsInput = document.getElementById('mac_debts');
var downInput = document.getElementById('mac_down');
var rateInput = document.getElementById('mac_rate');
var termInput = document.getElementById('mac_term');
var taxInsInput = document.getElementById('mac_tax_ins');
var resultsDiv = document.getElementById('mac_results');
var errorMsg = document.getElementById('mac_error_msg');
var annualIncome = parseFloat(incomeInput.value);
var monthlyDebts = parseFloat(debtsInput.value);
var downPayment = parseFloat(downInput.value);
var interestRate = parseFloat(rateInput.value);
var loanTermYears = parseFloat(termInput.value);
var taxInsRate = parseFloat(taxInsInput.value);
// 2. Validate
if (isNaN(annualIncome) || isNaN(monthlyDebts) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTermYears) || isNaN(taxInsRate)) {
errorMsg.style.display = 'block';
resultsDiv.style.display = 'none';
return;
}
errorMsg.style.display = 'none';
// 3. Logic Implementation
// Monthly Income
var monthlyIncome = annualIncome / 12;
// Front-End Ratio (Housing costs should not exceed 28% of gross income)
var maxPaymentFront = monthlyIncome * 0.28;
// Back-End Ratio (Total debt + housing should not exceed 36% of gross income)
var maxTotalDebtPayment = monthlyIncome * 0.36;
var maxPaymentBack = maxTotalDebtPayment – monthlyDebts;
// Determine which ratio limits the affordability
var affordableMonthlyPayment = 0;
var limitingFactor = "";
var dtiUsed = "";
if (maxPaymentBack < maxPaymentFront) {
affordableMonthlyPayment = maxPaymentBack;
limitingFactor = "Debt Levels (Back-End Ratio)";
dtiUsed = "36% (Total Debt)";
} else {
affordableMonthlyPayment = maxPaymentFront;
limitingFactor = "Income (Front-End Ratio)";
dtiUsed = "28% (Housing Only)";
}
if (affordableMonthlyPayment < 0) {
affordableMonthlyPayment = 0;
}
// Reverse Engineering Home Price
// P = Home Price
// D = Down Payment
// M = Affordable Monthly Payment
// r = monthly interest rate
// n = total months
// T = Monthly Tax & Insurance Rate (as decimal of Home Price)
// Formula components
var r = (interestRate / 100) / 12;
var n = loanTermYears * 12;
var T = (taxInsRate / 100) / 12;
// Mortgage Factor: (r(1+r)^n) / ((1+r)^n – 1)
var pow = Math.pow(1 + r, n);
var mortgageFactor = 0;
if (r === 0) {
mortgageFactor = 1 / n;
} else {
mortgageFactor = (r * pow) / (pow – 1);
}
// The Equation: M = (P – D)*mortgageFactor + P*T
// M + D*mortgageFactor = P*(mortgageFactor + T)
// P = (M + D*mortgageFactor) / (mortgageFactor + T)
var maxHomePrice = (affordableMonthlyPayment + (downPayment * mortgageFactor)) / (mortgageFactor + T);
var loanAmount = maxHomePrice – downPayment;
if (maxHomePrice < 0) maxHomePrice = 0;
if (loanAmount < 0) loanAmount = 0;
// 4. Update UI
document.getElementById('mac_result_price').innerHTML = '$' + Math.floor(maxHomePrice).toLocaleString();
document.getElementById('mac_result_payment').innerHTML = '$' + Math.floor(affordableMonthlyPayment).toLocaleString();
document.getElementById('mac_result_loan').innerHTML = '$' + Math.floor(loanAmount).toLocaleString();
document.getElementById('mac_result_factor').innerHTML = limitingFactor;
document.getElementById('mac_result_dti').innerHTML = dtiUsed;
resultsDiv.style.display = 'block';
}
Understanding Mortgage Affordability
Calculating how much house you can afford is the critical first step in the home buying process. This Mortgage Affordability Calculator uses the standard debt-to-income (DTI) ratios preferred by lenders to give you a realistic estimate of your buying power. Unlike simple loan calculators, this tool accounts for your existing debts, down payment, and estimated property taxes and insurance to protect your financial health.
The 28/36 Rule Explained
Lenders typically use the 28/36 rule to determine if you qualify for a conventional mortgage. This rule consists of two thresholds:
Front-End Ratio (28%): Your 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 (including the new mortgage plus student loans, car payments, and credit cards) should not exceed 36% of your gross monthly income.
Our calculator checks both ratios and applies the lower limit to ensure you don't overextend yourself financially.
Factors That Impact Your Home Budget
Several variables can significantly shift your purchasing power:
Down Payment: A larger down payment reduces the loan amount needed, lowering monthly payments and potentially removing the need for Private Mortgage Insurance (PMI).
Interest Rates: Even a 1% difference in interest rates can change your buying power by tens of thousands of dollars over the life of a 30-year loan.
Existing Debt: High monthly obligations (like a car lease) directly reduce the amount available for a mortgage. Paying off small debts can sometimes boost your affordability more than a salary raise.
Loan Term: Opting for a 30-year term increases affordability compared to a 15-year term by spreading payments out longer, though you will pay more interest in total.
Frequently Asked Questions
Does this calculator include property taxes and insurance?
Yes. This calculator estimates property taxes and homeowners insurance as a percentage of the home value (defaulting to 1.5% annually). Since these costs are part of your monthly obligation, excluding them would give you an inflated and unrealistic home budget.
What if my DTI is higher than 36%?
While 36% is the standard for conventional loans, some loan programs like FHA loans may allow for higher back-end ratios, sometimes up to 43% or even 50% in specific circumstances. However, keeping your DTI lower ensures you have disposable income for emergencies and savings.
Should I spend the maximum amount calculated?
Not necessarily. The "Maximum Home Price" is the ceiling of what a bank might lend you, not necessarily what you should spend. It is often wise to buy below your maximum limit to maintain financial flexibility for maintenance costs, furnishing, and lifestyle goals.