*Estimates based on the 28/36 qualifying rule. Actual qualification may vary by lender.
function calculateAffordability() {
// Clear errors
var errorDiv = document.getElementById('errorMessage');
var resultsDiv = document.getElementById('resultsSection');
errorDiv.style.display = 'none';
// Get Inputs
var annualIncome = parseFloat(document.getElementById('annualIncome').value);
var monthlyDebts = parseFloat(document.getElementById('monthlyDebts').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseInt(document.getElementById('loanTerm').value);
var annualTaxIns = parseFloat(document.getElementById('annualTaxIns').value);
// Validation
if (isNaN(annualIncome) || annualIncome <= 0) {
errorDiv.innerText = "Please enter a valid annual income.";
errorDiv.style.display = 'block';
resultsDiv.style.display = 'none';
return;
}
// Default values for empty non-critical fields
if (isNaN(monthlyDebts)) monthlyDebts = 0;
if (isNaN(downPayment)) downPayment = 0;
if (isNaN(interestRate) || interestRate <= 0) interestRate = 6.5; // Default fallback
if (isNaN(annualTaxIns)) annualTaxIns = 3000; // Default estimate
// Logic Implementation (28/36 Rule)
var monthlyIncome = annualIncome / 12;
var monthlyTaxIns = annualTaxIns / 12;
// Rule 1: Front-End Ratio (Housing costs shouldn't exceed 28% of gross income)
var maxHousingPaymentFront = monthlyIncome * 0.28;
// Rule 2: Back-End Ratio (Total debts + housing shouldn't exceed 36% of gross income)
var maxTotalDebt = monthlyIncome * 0.36;
var maxHousingPaymentBack = maxTotalDebt – monthlyDebts;
// Determine the limiting factor (Lenders use the lower of the two)
var maxAllowablePayment = Math.min(maxHousingPaymentFront, maxHousingPaymentBack);
// If debts are too high, they might not afford a house
if (maxAllowablePayment <= monthlyTaxIns) {
errorDiv.innerText = "Based on your high monthly debts relative to income, you may not qualify for a mortgage at this time.";
errorDiv.style.display = 'block';
resultsDiv.style.display = 'none';
return;
}
// Calculate Principal & Interest (P&I) capacity
var maxPrincipalInterest = maxAllowablePayment – monthlyTaxIns;
// Mortgage Calculation: Reverse Annuity Formula
// PV = PMT * [ (1 – (1+r)^-n) / r ]
var r = (interestRate / 100) / 12; // Monthly interest rate
var n = loanTerm * 12; // Total months
var maxLoanAmount = 0;
if (r === 0) {
maxLoanAmount = maxPrincipalInterest * n;
} else {
maxLoanAmount = maxPrincipalInterest * ( (1 – Math.pow(1 + r, -n)) / r );
}
var maxHomePrice = maxLoanAmount + downPayment;
// Formatting Functions
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
// Output Results
document.getElementById('maxHomePriceDisplay').innerText = formatter.format(maxHomePrice);
document.getElementById('monthlyPaymentDisplay').innerText = formatter.format(maxAllowablePayment);
document.getElementById('loanAmountDisplay').innerText = formatter.format(maxLoanAmount);
document.getElementById('downPaymentDisplay').innerText = formatter.format(downPayment);
resultsDiv.style.display = 'block';
}
Understanding Home Affordability: The 28/36 Rule
Determining how much house you can afford is the critical first step in the home buying process. While getting pre-approved by a lender is the ultimate confirmation, using a Mortgage Affordability Calculator helps you set realistic expectations before you start viewing properties. This tool primarily relies on the "28/36 Rule," a standard metric used by financial institutions to determine creditworthiness.
The Golden Rule of Lending: Most lenders suggest that you should spend no more than 28% of your gross monthly income on housing expenses, and no more than 36% on total debt (including housing).
1. The Front-End Ratio (28%)
The front-end ratio looks strictly at your housing-related expenses. This includes your potential mortgage principal, interest, property taxes, and homeowners insurance (PITI). If your annual income is $100,000, your gross monthly income is roughly $8,333. According to the 28% rule, your total housing costs should not exceed $2,333 per month.
2. The Back-End Ratio (36%)
The back-end ratio provides a more comprehensive view of your financial health. It sums your proposed housing costs with all other recurring monthly debts, such as:
Credit card minimum payments
Car loans or leases
Student loans
Alimony or child support payments
Lenders want to ensure that your total debt load usually stays under 36% of your gross income. If you have significant student loan debt or a high car payment, this will lower the amount of house you can afford, even if your income is high.
Interest Rates and Purchasing Power
Your affordability is directly tied to current mortgage interest rates. A difference of just 1% in the interest rate can significantly change your buying power. As rates rise, the portion of your monthly payment that goes toward interest increases, reducing the amount available for principal repayment. This calculator adjusts your maximum loan amount automatically based on the interest rate input.
Don't Forget the "Hidden" Costs
When calculating affordability, it is vital to remember costs outside of the mortgage itself. Property taxes and homeowners insurance can vary wildly depending on location. A $400,000 home in a low-tax area might be affordable, while the same priced home in a high-tax district might push you over your DTI (Debt-to-Income) limit. Always factor in these estimates to get an accurate picture of what you can truly afford.
Strategies to Increase Affordability
If the results from the calculator are lower than expected, consider these strategies:
Reduce Monthly Debt: Paying off a car loan or lowering credit card balances frees up monthly cash flow, directly increasing your borrowing capacity.
Increase Down Payment: A larger down payment reduces the loan amount required, lowering monthly payments and potentially avoiding Private Mortgage Insurance (PMI).
Improve Credit Score: A higher credit score often qualifies you for lower interest rates, which increases your purchasing power.