12 Months Interest Rate Calculator

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Home Affordability Calculator

30 Years Fixed 20 Years Fixed 15 Years Fixed 10 Years Fixed

You Can Afford a Home Up To:

$0

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) / 100 / 12; var loanTermMonths = parseInt(document.getElementById('loanTerm').value) * 12; var taxRate = parseFloat(document.getElementById('propertyTax').value) / 100 / 12; var insuranceRate = 0.0035 / 12; // Standard average home insurance estimate if (!annualIncome || !interestRate || !loanTermMonths) { alert("Please fill in all required fields."); return; } // Using the 36% Debt-to-Income rule (Back-end ratio) var monthlyGrossIncome = annualIncome / 12; var maxTotalMonthlyDebt = monthlyGrossIncome * 0.36; var maxMonthlyPITI = maxTotalMonthlyDebt – monthlyDebt; if (maxMonthlyPITI <= 0) { alert("Your monthly debts exceed the recommended 36% debt-to-income ratio."); return; } // Calculation for max loan amount: P = L[c(1 + c)^n]/[(1 + c)^n – 1] // We include Taxes and Insurance in the calculation // P = L * [ (i(1+i)^n) / ((1+i)^n – 1) + taxRate + insuranceRate ] var factor = (interestRate * Math.pow(1 + interestRate, loanTermMonths)) / (Math.pow(1 + interestRate, loanTermMonths) – 1); var maxLoanAmount = maxMonthlyPITI / (factor + taxRate + insuranceRate); var maxHomePrice = maxLoanAmount + downPayment; var actualMonthlyPrincipalInterest = maxLoanAmount * factor; document.getElementById('resultArea').style.display = 'block'; document.getElementById('maxPriceDisplay').innerText = '$' + Math.round(maxHomePrice).toLocaleString(); document.getElementById('monthlyPaymentDisplay').innerText = 'Estimated Monthly Payment (PITI): $' + Math.round(maxMonthlyPITI).toLocaleString(); document.getElementById('dtiDisplay').innerText = 'Based on a 36% Debt-to-Income Ratio'; window.scrollTo({ top: document.getElementById('resultArea').offsetTop + 100, behavior: 'smooth' }); }

How Much House Can I Truly Afford?

Determining your home buying budget is the most critical step in the real estate journey. While a bank might pre-approve you for a high amount, "affordability" depends on your lifestyle, monthly debts, and future financial goals. This calculator uses the industry-standard 28/36 rule to estimate a home price that keeps you financially secure.

Understanding the 28/36 Rule

Lenders typically use two specific ratios to determine how much they will lend you:

  • Front-End Ratio (28%): Your total monthly housing costs (Principal, Interest, Taxes, and Insurance – PITI) should not exceed 28% of your gross monthly income.
  • Back-End Ratio (36%): Your total monthly 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 That Influence Affordability

  1. Gross Annual Income: Your total earnings before taxes. Lenders look at stability and history of this income.
  2. Debt-to-Income (DTI) Ratio: The percentage of your income that goes toward paying debts. The lower your DTI, the higher the loan amount you may qualify for.
  3. Down Payment: A larger down payment reduces your loan-to-value ratio, often resulting in better interest rates and the removal of Private Mortgage Insurance (PMI).
  4. Interest Rates: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars.

Realistic Example Scenario

Financial Profile Values
Annual Household Income $100,000
Monthly Debt (Car/Student Loans) $500
Down Payment Saved $50,000
Interest Rate 6.5%
Estimated Max Home Price ~$415,000

Tips for Increasing Your Buying Power

If the calculator shows a lower number than you hoped for, consider these strategies:

  • Pay Down High-Interest Debt: Reducing your monthly credit card or car payments directly increases the amount a lender will allow for a mortgage.
  • Improve Your Credit Score: A higher credit score helps you secure a lower interest rate, which lowers your monthly payment for the same loan amount.
  • Save for a Larger Down Payment: This reduces the principal balance and can eliminate the need for PMI, saving you hundreds monthly.

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