Loan Calculator Monthly Add on Rate

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Home Affordability Calculator

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

Estimated Maximum Home Price:

How Much House Can I Afford?

Determining your home buying budget is the most critical step in the real estate journey. Lenders typically use the Debt-to-Income (DTI) ratio to decide how much they are willing to lend you. This calculator uses a standard DTI threshold of 36% to ensure you don't become "house poor."

Understanding the Calculation

To find your affordability, we analyze four primary factors:

  • Gross Monthly Income: Your total earnings before taxes.
  • Existing Debts: Monthly obligations like car loans, student loans, and credit card minimums.
  • The Front-End Ratio: Usually, lenders prefer that your mortgage payment (including taxes and insurance) doesn't exceed 28% of your gross income.
  • The Back-End Ratio: Your total debt (mortgage + existing debts) should generally stay below 36-43%.

A Realistic Example

Imagine a couple earning a combined $100,000 per year. Their monthly gross income is approximately $8,333. If they have $500 in monthly car payments and $300 in student loans, their total existing debt is $800.

Using a 36% DTI limit, their total allowable monthly debt is $3,000 ($8,333 x 0.36). After subtracting their $800 existing debt, they have $2,200 available for a monthly mortgage payment (PITI: Principal, Interest, Taxes, and Insurance).

With a 6.5% interest rate on a 30-year term and a $50,000 down payment, this couple could realistically afford a home priced around $345,000.

Factors That Influence Your Budget

While this calculator provides a strong estimate, other factors can shift your purchasing power:

  1. Credit Score: A higher score secures a lower interest rate, which drastically increases the loan amount you can afford for the same monthly payment.
  2. Down Payment: A larger down payment reduces the loan-to-value ratio and may eliminate the need for Private Mortgage Insurance (PMI).
  3. Property Taxes & Insurance: These vary significantly by ZIP code. High-tax areas will lower the maximum home price you can afford.
function calculateAffordability() { var annualIncome = parseFloat(document.getElementById('annualIncome').value); var monthlyDebt = parseFloat(document.getElementById('monthlyDebt').value); var downPayment = parseFloat(document.getElementById('downPayment').value); var interestRate = parseFloat(document.getElementById('interestRate').value) / 100 / 12; var loanTermMonths = parseFloat(document.getElementById('loanTerm').value) * 12; var taxRate = (parseFloat(document.getElementById('propertyTax').value) / 100) / 12; if (isNaN(annualIncome) || isNaN(interestRate) || isNaN(loanTermMonths)) { alert("Please enter valid numerical values."); return; } // 1. Calculate Monthly Gross Income var monthlyIncome = annualIncome / 12; // 2. Use the 36% DTI Rule for total debt var maxTotalMonthlyDebt = monthlyIncome * 0.36; // 3. Subtract existing debts to find available amount for PITI (Principal, Interest, Tax, Insurance) var availableForPITI = maxTotalMonthlyDebt – monthlyDebt; // 4. Estimate Homeowners Insurance (Roughly $100/mo) var estInsurance = 100; var availableForPIT = availableForPITI – estInsurance; if (availableForPIT <= 0) { document.getElementById('maxHomePrice').innerHTML = "Check Inputs"; document.getElementById('monthlyBreakdown').innerHTML = "Your current monthly debts exceed the recommended 36% debt-to-income ratio."; document.getElementById('resultBox').style.display = "block"; return; } // 5. Solve for Home Price (H) // Monthly Payment (P) = [ (H – DownPayment) * interestRate ] / [ 1 – (1 + interestRate)^-n ] // Monthly Tax (T) = H * taxRate // AvailableForPIT = P + T // AvailableForPIT = [ (H – DP) * r / (1 – (1+r)^-n) ] + (H * taxRate) var factor = interestRate / (1 – Math.pow(1 + interestRate, -loanTermMonths)); // Algebra: AvailableForPIT = H*factor – DP*factor + H*taxRate // AvailableForPIT + DP*factor = H * (factor + taxRate) // H = (AvailableForPIT + DP*factor) / (factor + taxRate) var maxHomePrice = (availableForPIT + (downPayment * factor)) / (factor + taxRate); // Format results var formattedPrice = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' }).format(maxHomePrice.toFixed(0)); var formattedMonthly = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' }).format(availableForPITI.toFixed(0)); document.getElementById('maxHomePrice').innerHTML = formattedPrice; document.getElementById('monthlyBreakdown').innerHTML = "This budget assumes a total monthly housing payment of " + formattedMonthly + " (including taxes and insurance)."; document.getElementById('resultBox').style.display = "block"; }

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