Loan Rate Calculation

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Home Affordability Calculator

Estimated Maximum Home Purchase Price

Estimated Monthly Principal & Interest:

Estimated Monthly Taxes & Insurance:

Total Monthly Housing Payment:

How Much House Can I Afford?

Understanding your home affordability is the most critical step in the home-buying process. Many factors determine your "buying power," including your gross income, current debt obligations, the prevailing interest rates, and the amount you have saved for a down payment.

The 28/36 Rule Explained

Lenders typically use the 28/36 rule to determine how much they are willing to lend you:

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

Key Factors Affecting Your Budget

While income is the baseline, several variables can significantly shift your maximum home price:

  • Interest Rates: Even a 1% increase in interest rates can reduce your buying power by tens of thousands of dollars.
  • Down Payment: A larger down payment reduces the loan amount and often eliminates the need for Private Mortgage Insurance (PMI).
  • Property Taxes: High-tax areas require more of your monthly budget to go toward the government rather than the loan principal.

Real-World Example:

Imagine a couple earning $100,000 per year with $500 in monthly car payments and $60,000 saved for a down payment. At a 6.5% interest rate:

  • Gross Monthly Income: $8,333
  • Max Monthly Debt (36%): $3,000
  • Available for Mortgage: $3,000 – $500 = $2,500
  • Estimated Buying Power: ~$385,000

Tips to Increase Your Affordability

If the calculator result is lower than you hoped, consider these strategies: 1. Pay down high-interest debt: This lowers your DTI (Debt-to-Income) ratio immediately. 2. Improve your credit score: A higher score qualifies you for lower interest rates. 3. Save for a larger down payment: This lowers your monthly payment and increases your equity from day one.

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); var loanTerm = parseFloat(document.getElementById('loanTerm').value); var propertyTaxRate = parseFloat(document.getElementById('propertyTax').value); if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate)) { alert("Please enter valid numerical values."); return; } // Monthly Gross Income var monthlyIncome = annualIncome / 12; // Apply 36% Debt-to-Income Rule (Back-end ratio) var maxTotalMonthlyDebt = monthlyIncome * 0.36; var maxMonthlyHousing = maxTotalMonthlyDebt – monthlyDebt; // Ensure it doesn't exceed 28% rule (Front-end ratio) var frontEndMax = monthlyIncome * 0.28; if (maxMonthlyHousing > frontEndMax) { maxMonthlyHousing = frontEndMax; } if (maxMonthlyHousing <= 0) { document.getElementById('maxHomePrice').innerText = "Ineligible (Debts too high)"; document.getElementById('affordabilityResult').style.display = "block"; return; } // Estimate Insurance and Tax proportions (Roughly 25% of the housing payment usually goes to TI) // For more accuracy, we solve for Principal + Interest // P&I = MaxHousing – MonthlyTaxes – MonthlyInsurance // Let's assume Insurance is $100/mo and Taxes are based on input var estInsurance = 125; // Monthly interest rate var r = (interestRate / 100) / 12; // Number of payments var n = loanTerm * 12; // We solve for Loan Amount (L) where: // MaxMonthlyHousing = [L * r * (1+r)^n] / [(1+r)^n – 1] + (HomePrice * TaxRate / 12) + Insurance // HomePrice = L + DownPayment // Simplified algebraic solve for L: var taxFactor = (propertyTaxRate / 100) / 12; var mortgageFactor = (r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1); // MaxMonthlyHousing = L * mortgageFactor + (L + DownPayment) * taxFactor + Insurance // MaxMonthlyHousing – (DownPayment * taxFactor) – Insurance = L * (mortgageFactor + taxFactor) var numerator = maxMonthlyHousing – (downPayment * taxFactor) – estInsurance; var denominator = mortgageFactor + taxFactor; var loanAmount = numerator / denominator; if (loanAmount < 0) { loanAmount = 0; } var totalHomePrice = loanAmount + downPayment; var monthlyPI = loanAmount * mortgageFactor; var monthlyTax = totalHomePrice * taxFactor; var totalPayment = monthlyPI + monthlyTax + estInsurance; // Display Results document.getElementById('maxHomePrice').innerText = "$" + Math.round(totalHomePrice).toLocaleString(); document.getElementById('resMonthlyPI').innerText = "$" + Math.round(monthlyPI).toLocaleString(); document.getElementById('resMonthlyTI').innerText = "$" + Math.round(monthlyTax + estInsurance).toLocaleString(); document.getElementById('resTotalPayment').innerText = "$" + Math.round(totalPayment).toLocaleString(); document.getElementById('affordabilityResult').style.display = "block"; }

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