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Home Affordability Calculator

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Your Estimated Home Budget

Maximum Purchase Price $0
Monthly P&I Payment $0
Total Monthly Payment $0
function calculateAffordability() { var annualIncome = parseFloat(document.getElementById('annualIncome').value) || 0; var monthlyDebts = parseFloat(document.getElementById('monthlyDebts').value) || 0; var downPayment = parseFloat(document.getElementById('downPayment').value) || 0; var interestRate = parseFloat(document.getElementById('interestRate').value) || 0; var loanTerm = parseInt(document.getElementById('loanTerm').value) || 30; var taxesInsurance = parseFloat(document.getElementById('taxesInsurance').value) || 0; var monthlyGrossIncome = annualIncome / 12; // Standard debt-to-income ratio for affordability is typically 36% var maxTotalMonthlyDebt = monthlyGrossIncome * 0.36; var availableForMortgage = maxTotalMonthlyDebt – monthlyDebts; var availableForPI = availableForMortgage – taxesInsurance; if (availableForPI <= 0) { alert("Your current debts and estimated taxes exceed the recommended 36% Debt-to-Income ratio. Please adjust your income or debt values."); document.getElementById('results-area').style.display = 'none'; return; } var monthlyRate = (interestRate / 100) / 12; var numberOfPayments = loanTerm * 12; // Present Value formula: PV = PMT * [(1 – (1 + r)^-n) / r] var loanAmount = availableForPI * ((1 – Math.pow(1 + monthlyRate, -numberOfPayments)) / monthlyRate); var maxPrice = loanAmount + downPayment; document.getElementById('maxHomePrice').innerText = '$' + Math.round(maxPrice).toLocaleString(); document.getElementById('monthlyPI').innerText = '$' + Math.round(availableForPI).toLocaleString(); document.getElementById('totalMonthly').innerText = '$' + Math.round(availableForMortgage).toLocaleString(); document.getElementById('results-area').style.display = 'block'; }

How Much House Can You Really Afford?

Determining your home buying budget is the most critical step in the real estate journey. While a bank may pre-approve you for a high amount, understanding your personal home affordability ensures you don't become "house poor." This calculator uses the standard 36% Debt-to-Income (DTI) rule to provide a conservative, sustainable estimate of your purchasing power.

Understanding the 36% Rule

Financial experts generally recommend that your total monthly debt payments—including your new mortgage, property taxes, homeowners insurance, car loans, and credit card debt—should not exceed 36% of your gross monthly income. This ratio ensures you have enough cash flow for savings, maintenance, and lifestyle expenses.

Key Factors That Influence Your Budget

  • Gross Annual Income: Your total income before taxes is the baseline for all lending calculations.
  • Existing Debts: Monthly obligations like student loans or car payments directly reduce the amount you can put toward a mortgage.
  • Down Payment: The more cash you bring to the table, the lower your loan amount and interest costs will be.
  • Interest Rates: Even a 1% change in interest rates can swing your buying power by tens of thousands of dollars.

Realistic Example: The Mid-Career Professional

Let's look at a realistic scenario for a buyer in today's market:

Scenario: A couple earns a combined $120,000 annually. They have $600 in monthly car payments and have saved $50,000 for a down payment. With current interest rates at 6.5% and estimated taxes/insurance of $500/month:

  • Monthly Gross Income: $10,000
  • Max Debt Allowance (36%): $3,600
  • Available for Housing: $3,600 – $600 = $3,000
  • Available for P&I: $3,000 – $500 = $2,500
  • Estimated Max Home Price: ~$445,000

Frequently Asked Questions

1. Does this include Property Taxes?

Yes, the calculator includes a field for monthly taxes and insurance, as these are mandatory components of your monthly escrow payment.

2. What DTI ratio do lenders use?

While we use 36% for a safe estimate, some FHA loans allow for a DTI as high as 43% or even 50% in specific circumstances. However, borrowing at your absolute limit increases financial risk.

3. How does the loan term affect my price?

A 15-year mortgage will have significantly lower interest costs over time but will result in a much higher monthly payment, which reduces your total purchasing power compared to a 30-year loan.

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