Interest Rate vs Apr Calculator

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Home Affordability Calculator

Calculate how much house you can actually afford based on your income and debts.

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Affordability Analysis

Maximum Home Price:

$0

Estimated Monthly Payment:

$0

*This estimate uses the 36% Debt-to-Income (DTI) rule-of-thumb. Lenders may vary in their requirements.

How Much House Can You Afford?

Determining your home buying budget is the most critical step in the real estate process. While a bank might pre-approve you for a specific amount, knowing what fits into your monthly lifestyle is paramount. This calculator uses professional financial standards to help you find that "sweet spot."

The 28/36 Rule Explained

Mortgage lenders typically follow the 28/36 rule to decide how much they are willing to lend you:

  • Front-End Ratio (28%): Your total housing costs (mortgage, taxes, and insurance) should not exceed 28% of your gross monthly income.
  • Back-End Ratio (36%): Your total debt obligations (housing plus car loans, student debt, and credit cards) should not exceed 36% of your gross monthly income.

Key Factors Affecting Your Budget

  1. Interest Rates: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars.
  2. Down Payment: A larger down payment reduces your loan amount and can eliminate the need for Private Mortgage Insurance (PMI).
  3. Debt-to-Income (DTI) Ratio: High monthly payments on other debts will lower the amount a bank is willing to lend for a home.
  4. Property Taxes: These vary wildly by location. Always check local tax rates for the specific neighborhood you are eyeing.

Example Calculation

If you earn $100,000 per year, your gross monthly income is $8,333. Applying the 36% rule, your total monthly debt payments (including your new mortgage) should stay under $3,000. If you currently pay $500/month for a car loan, you have roughly $2,500 available for your mortgage, taxes, and insurance.

function calculateAffordability() { var annualIncome = parseFloat(document.getElementById('annualIncome').value); var monthlyDebt = parseFloat(document.getElementById('monthlyDebt').value) || 0; var downPayment = parseFloat(document.getElementById('downPayment').value) || 0; var interestRate = parseFloat(document.getElementById('interestRate').value); var loanTerm = parseInt(document.getElementById('loanTerm').value); var taxInsurance = parseFloat(document.getElementById('taxInsurance').value) || 0; if (isNaN(annualIncome) || annualIncome <= 0) { alert("Please enter a valid annual income."); return; } // 1. Calculate Monthly Gross Income var monthlyGross = annualIncome / 12; // 2. Use the 36% DTI Rule (Total debt should not exceed 36% of gross income) var maxTotalMonthlyDebtAllowed = monthlyGross * 0.36; // 3. Amount available for PITI (Principal, Interest, Taxes, Insurance) var availableForPITI = maxTotalMonthlyDebtAllowed – monthlyDebt; // 4. Amount available for PI (Principal and Interest) only var availableForPI = availableForPITI – taxInsurance; if (availableForPI <= 0) { document.getElementById('resultsArea').style.display = 'block'; document.getElementById('maxHomePrice').innerText = "Insufficient Income"; document.getElementById('monthlyPayment').innerText = "$0"; return; } // 5. Reverse Mortgage Formula // P = MonthlyPayment / [ i(1 + i)^n / ((1 + i)^n – 1) ] var i = (interestRate / 100) / 12; var n = loanTerm * 12; var mortgagePrincipal; if (i === 0) { mortgagePrincipal = availableForPI * n; } else { var factor = (i * Math.pow(1 + i, n)) / (Math.pow(1 + i, n) – 1); mortgagePrincipal = availableForPI / factor; } // 6. Total Home Price var maxHomePrice = mortgagePrincipal + downPayment; // Display Results document.getElementById('resultsArea').style.display = 'block'; document.getElementById('maxHomePrice').innerText = "$" + Math.round(maxHomePrice).toLocaleString(); document.getElementById('monthlyPayment').innerText = "$" + Math.round(availableForPITI).toLocaleString(); // Smooth scroll to results document.getElementById('resultsArea').scrollIntoView({ behavior: 'smooth', block: 'nearest' }); }

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