Home Buying Power Calculator

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Home Buying Power Estimator

Estimated Maximum Home Price
Calculated Max Monthly Housing Payment
Estimated Loan Amount

How Home Buying Power is Calculated

Your "Buying Power" represents the maximum property value you can afford based on your current financial health. Lenders primarily use a metric called the Debt-to-Income (DTI) ratio to determine how much they are willing to lend you. Most conventional guidelines suggest that your total monthly debt obligations, including your new mortgage, should not exceed 36% to 43% of your gross monthly income.

The Core Factors of Purchase Capacity

  • Gross Household Earnings: This is your total income before taxes. The more you earn, the higher the monthly payment you can support.
  • Existing Liabilities: Recurring monthly costs like car payments, student loans, and credit card minimums reduce the "room" you have for a mortgage payment.
  • Cash Contribution: The amount of liquid assets you bring to the closing table. This is added to your maximum loan amount to determine the total home price.
  • Market Percentage Rates: As the cost of borrowing increases, your buying power decreases because a larger portion of your monthly payment goes toward interest rather than principal.

Example Calculation

If a household earns $100,000 annually, their gross monthly income is approximately $8,333. Using a 36% DTI threshold, their total allowable monthly debt is $3,000. If they already have $500 in monthly car and student loan payments, they have $2,500 remaining for their mortgage, taxes, and insurance. At a 6% market rate over 30 years, that $2,500 monthly capacity could support a loan of roughly $350,000. Adding a $50,000 cash contribution brings the total buying power to $400,000.

Strategies to Increase Your Capacity

To boost your home buying power, consider paying down high-interest revolving debts to lower your monthly liabilities. Additionally, improving your credit score can help you secure a lower percentage rate on your loan, which significantly increases the total amount you can afford to borrow with the same monthly payment.

function calculateBuyingPower() { var yearlyIncome = parseFloat(document.getElementById('yearlyEarnings').value); var monthlyDebt = parseFloat(document.getElementById('monthlyLiabilities').value); var cashContribution = parseFloat(document.getElementById('liquidCapital').value); var ratePercent = parseFloat(document.getElementById('annualMarketRate').value); var taxRate = parseFloat(document.getElementById('localTaxEstimate').value); var years = parseFloat(document.getElementById('amortizationTerm').value); if (isNaN(yearlyIncome) || isNaN(monthlyDebt) || isNaN(cashContribution) || isNaN(ratePercent) || isNaN(taxRate)) { alert("Please fill in all fields with valid numbers."); return; } // 1. Calculate Monthly Gross Income var monthlyGross = yearlyIncome / 12; // 2. Maximum Monthly Payment (using 36% Debt-to-Income ratio) // This includes Principal, Interest, Taxes, and Insurance (PITI) var dtiLimit = 0.36; var maxTotalMonthlyPayment = (monthlyGross * dtiLimit) – monthlyDebt; if (maxTotalMonthlyPayment <= 0) { document.getElementById('maxPrice').innerHTML = "Insufficient Income"; document.getElementById('monthlyPITI').innerHTML = "$0"; document.getElementById('loanAmount').innerHTML = "$0"; document.getElementById('results').style.display = 'block'; return; } // 3. Estimate Principal & Interest portion // Taxes and Insurance usually take up roughly 1.5% of the home value annually // We need to solve for Price: (Price * TaxRate / 12) + PI_Payment = maxTotalMonthlyPayment // PI_Payment = Loan * [ r(1+r)^n / ((1+r)^n – 1) ] // Loan = Price – CashContribution var r = (ratePercent / 100) / 12; var n = years * 12; var t = (taxRate / 100) / 12; // Simplified factor for PI payment per dollar of loan var pmtFactor = (r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1); // Algebra: (Price – Cash) * pmtFactor + (Price * t) = maxTotalMonthlyPayment // Price * pmtFactor – Cash * pmtFactor + Price * t = maxTotalMonthlyPayment // Price * (pmtFactor + t) = maxTotalMonthlyPayment + (Cash * pmtFactor) // Price = (maxTotalMonthlyPayment + Cash * pmtFactor) / (pmtFactor + t) var estimatedPrice = (maxTotalMonthlyPayment + (cashContribution * pmtFactor)) / (pmtFactor + t); var estimatedLoan = estimatedPrice – cashContribution; if (estimatedLoan < 0) { estimatedLoan = 0; estimatedPrice = cashContribution; } // Display results document.getElementById('results').style.display = 'block'; document.getElementById('maxPrice').innerHTML = "$" + estimatedPrice.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('monthlyPITI').innerHTML = "$" + maxTotalMonthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('loanAmount').innerHTML = "$" + estimatedLoan.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); }

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