function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById('aff_income').value) || 0;
var downPayment = parseFloat(document.getElementById('aff_down').value) || 0;
var monthlyDebts = parseFloat(document.getElementById('aff_debts').value) || 0;
var interestRate = (parseFloat(document.getElementById('aff_rate').value) || 0) / 100 / 12;
var loanTermMonths = (parseFloat(document.getElementById('aff_term').value) || 30) * 12;
var taxInsRate = (parseFloat(document.getElementById('aff_tax').value) || 1.5) / 100 / 12;
var monthlyGrossIncome = annualIncome / 12;
// Using a 36% Back-End DTI ratio for calculation
var maxTotalMonthlyPayment = monthlyGrossIncome * 0.36;
var availableForMortgage = maxTotalMonthlyPayment – monthlyDebts;
if (availableForMortgage <= 0) {
document.getElementById('afford-results').style.display = 'block';
document.getElementById('res_home_price').innerText = 'N/A';
document.getElementById('res_monthly_pay').innerText = 'N/A';
document.getElementById('res_explanation').innerText = 'Based on your current debt-to-income ratio, your monthly debts exceed the recommended 36% threshold for a mortgage. Consider reducing debt or increasing income.';
return;
}
// Formula: availableForMortgage = [Loan * (r(1+r)^n)/((1+r)^n -1)] + [HomePrice * taxInsRate]
// Since Loan = HomePrice – DownPayment
// availableForMortgage = (HomePrice – DownPayment) * [MortgageFactor] + HomePrice * [taxInsRate]
var mortgageFactor = (interestRate * Math.pow(1 + interestRate, loanTermMonths)) / (Math.pow(1 + interestRate, loanTermMonths) – 1);
// Rearranging for HomePrice:
// availableForMortgage + (DownPayment * mortgageFactor) = HomePrice * (mortgageFactor + taxInsRate)
var maxHomePrice = (availableForMortgage + (downPayment * mortgageFactor)) / (mortgageFactor + taxInsRate);
var loanAmount = maxHomePrice – downPayment;
if (loanAmount < 0) {
maxHomePrice = downPayment;
loanAmount = 0;
}
var monthlyPI = loanAmount * mortgageFactor;
var monthlyTaxIns = maxHomePrice * taxInsRate;
var totalMonthly = monthlyPI + monthlyTaxIns;
document.getElementById('afford-results').style.display = 'block';
document.getElementById('res_home_price').innerText = '$' + Math.round(maxHomePrice).toLocaleString();
document.getElementById('res_monthly_pay').innerText = '$' + Math.round(totalMonthly).toLocaleString();
document.getElementById('res_explanation').innerHTML =
'Analysis: Based on an annual income of $' + annualIncome.toLocaleString() +
' and monthly debts of $' + monthlyDebts.toLocaleString() + ', a conservative lender would likely approve a total monthly housing payment of roughly $' +
Math.round(totalMonthly).toLocaleString() + '. This assumes a 36% Debt-to-Income (DTI) ratio. With your $' +
downPayment.toLocaleString() + ' down payment, this targets a home value of approximately $' +
Math.round(maxHomePrice).toLocaleString() + '.';
}
How to Calculate How Much House You Can Afford
Buying a home is the most significant financial decision most people will ever make. To ensure you don't become "house poor," it is critical to use a home affordability calculator that looks beyond just the monthly mortgage payment. Our calculator factors in your income, existing debts, and local taxes to give you a realistic purchase target.
The 28/36 Rule Explained
Financial advisors and mortgage lenders often use the 28/36 rule to determine your borrowing power:
The 28% Rule: Your monthly housing expenses (principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
The 36% Rule: Your total debt obligations—including your new mortgage plus car loans, student loans, and credit card payments—should not exceed 36% of your gross monthly income.
Key Factors Influencing Your Budget
Several variables can shift your maximum home price significantly:
Down Payment: A larger down payment reduces your loan-to-value ratio, potentially eliminating the need for Private Mortgage Insurance (PMI) and lowering your monthly interest costs.
Interest Rates: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars over a 30-year term.
Property Taxes: These vary wildly by state and county. A high-tax area will lower the amount you can spend on the actual house price because more of your monthly budget goes to the government.
Debt-to-Income Ratio (DTI): If you have high monthly car payments or student debt, your "allowable" mortgage payment shrinks, even if you have a high salary.
Real-World Example
Let's look at a typical household scenario:
Imagine a couple earning $100,000 per year ($8,333/month) with $600 in monthly car payments. Using the 36% rule, their total debt limit is $3,000/month. Subtracting the $600 car payment leaves $2,400 available for a mortgage payment. At a 6.5% interest rate with a $50,000 down payment, they could afford a home priced at approximately $365,000, depending on local property tax rates.
Steps to Increase Your Affordability
If the results of the calculator are lower than you hoped, consider these strategies:
Pay Down Debt: Reducing your monthly recurring payments directly increases the "space" in your DTI for a mortgage.
Improve Your Credit Score: A higher score qualifies you for lower interest rates, which lowers your monthly payment and allows you to borrow more.
Save a Larger Down Payment: This reduces the loan amount and interest paid over time.
Consider a Different Location: Moving to an area with lower property taxes can significantly increase your buying power for the same monthly cost.