How Expensive of a House Can I Afford Calculator

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Home Purchase Capacity Calculator

Estimated Affordability Range

Conservative Limit

Maximum Limit

function calculateCapacity() { var income = parseFloat(document.getElementById('yearlyIncome').value); var debt = parseFloat(document.getElementById('monthlyDebt').value) || 0; var cash = parseFloat(document.getElementById('cashOnHand').value) || 0; var resultDiv = document.getElementById('affordabilityResult'); if (isNaN(income) || income <= 0) { alert("Please enter a valid annual income."); return; } var monthlyGross = income / 12; // Using the 28/36 rule for estimation // 28% for housing PITI, 36% for total debt-to-income (DTI) var housingLimitByIncome = monthlyGross * 0.28; var housingLimitByDTI = (monthlyGross * 0.36) – debt; // We take the lower of the two for the safe monthly budget var safeMonthlyBudget = Math.min(housingLimitByIncome, housingLimitByDTI); var aggressiveMonthlyBudget = (monthlyGross * 0.43) – debt; // 43% DTI is often a hard limit // Approximation factor: Based on current market averages for tax/insurance/interest // A multiplier of 145 equates roughly to a 6.5% interest rate + 1.2% property tax/insurance var conservativeLoan = safeMonthlyBudget * 140; var maxLoan = aggressiveMonthlyBudget * 145; if (conservativeLoan < 0) conservativeLoan = 0; if (maxLoan < 0) maxLoan = 0; var conservativeTotal = conservativeLoan + cash; var maxTotal = maxLoan + cash; document.getElementById('conservativePrice').innerText = "$" + Math.round(conservativeTotal).toLocaleString(); document.getElementById('maxPrice').innerText = "$" + Math.round(maxTotal).toLocaleString(); document.getElementById('monthlyWarning').innerText = "This estimate assumes a monthly housing budget between $" + Math.round(safeMonthlyBudget).toLocaleString() + " and $" + Math.round(aggressiveMonthlyBudget).toLocaleString() + " including principal, interest, taxes, and insurance."; resultDiv.style.display = 'block'; }

How to Determine How Much House You Can Afford

Buying a home is the most significant financial decision most individuals will ever make. To ensure long-term financial stability, it is vital to calculate your purchasing power based on your unique financial profile rather than relying solely on what a lender is willing to offer.

The 28/36 Rule Explained

Most financial advisors and mortgage underwriters use the "28/36 Rule" as a primary benchmark for affordability:

  • Front-End Ratio (28%): This suggests that your total monthly housing costs—including principal, interest, property taxes, and homeowners insurance—should not exceed 28% of your gross monthly income.
  • Back-End Ratio (36%): This suggests that your total debt payments (housing costs plus car loans, student loans, and credit card payments) should not exceed 36% of your gross monthly income.

The Role of Recurring Debt

Your existing debt obligations directly reduce your home-buying budget. Because lenders look at your Debt-to-Income (DTI) ratio, every dollar you pay toward a car loan or credit card balance is a dollar that cannot be used toward a mortgage payment. Reducing high-interest debt before beginning your home search is one of the most effective ways to increase your purchasing capacity.

Examples of Purchasing Power

Consider two households with identical incomes but different debt profiles:

Financial Metric Household A Household B
Annual Gross Income $100,000 $100,000
Monthly Debt Payments $200 $900
Upfront Cash/Savings $60,000 $60,000
Est. Max House Price ~$450,000 ~$360,000

Factoring in Upfront Costs

It is important to remember that not all your available cash goes toward the equity of the home. When calculating "Funds Available for Upfront Costs," you must account for closing costs, which typically range from 2% to 5% of the home's purchase price. Our calculator factors in the total capacity by combining your estimated borrowing power with your liquid assets.

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