Determining how much house you can afford is a crucial step in the home-buying process. While Zillow's calculator provides an estimate, it's based on several key financial factors and general lending guidelines. This calculator aims to give you a quick, data-driven insight into your potential home-buying power.
How the Calculation Works
This calculator estimates your maximum home price by considering your income, existing debts, available down payment, and credit score. Lenders typically use a debt-to-income (DTI) ratio to assess your ability to manage monthly payments. A common guideline for housing expenses (including mortgage principal and interest, property taxes, and homeowner's insurance) is to keep them below 28% of your gross monthly income, and total debt payments (including housing) below 36%.
The calculation involves several steps:
Gross Monthly Income: Your annual income is divided by 12.
Maximum Housing Payment: A percentage (often around 28%) of your gross monthly income is allocated for housing costs (PITI – Principal, Interest, Taxes, Insurance).
Available Income for Debt: This is your gross monthly income minus your other monthly debt payments.
Estimated Loan Amount: Based on your available income for debt and estimated property taxes/insurance, we can infer a maximum loan amount.
Impact of Credit Score: A higher credit score generally qualifies you for better interest rates, which can increase your purchasing power. This calculator uses a simplified approach, assuming that higher scores facilitate more favorable lending terms.
Down Payment Adjustment: Your available down payment is added to the estimated maximum loan amount to arrive at the total estimated maximum home price.
Factors Not Explicitly Included (But Important)
While this calculator provides a good starting point, remember that actual mortgage approval depends on many factors, including:
Interest Rates: Current market interest rates significantly impact your monthly payment and, thus, your affordability.
Property Taxes and Homeowner's Insurance: These vary greatly by location and specific property.
Private Mortgage Insurance (PMI): Typically required if your down payment is less than 20%.
HOA Fees: If applicable for condos or certain communities.
Lender Specifics: Each lender has its own underwriting criteria and DTI limits.
Closing Costs: These are separate expenses you'll need to cover.
Disclaimer: This calculator is for estimation purposes only and does not constitute financial advice. Consult with a qualified mortgage lender for personalized guidance and pre-approval.
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var creditScore = parseFloat(document.getElementById("creditScore").value);
// Basic validation
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(creditScore)) {
document.getElementById("result-value").innerText = "Please enter valid numbers.";
return;
}
// — Affordability Calculation Logic (Simplified) —
// Assume a maximum housing DTI ratio (e.g., 28%) and total DTI ratio (e.g., 36%)
// This is a simplification. Real lenders use complex models.
var maxHousingDTI = 0.28;
var maxTotalDTI = 0.36;
var grossMonthlyIncome = annualIncome / 12;
// Calculate maximum allowed total monthly debt payment based on total DTI
var maxTotalMonthlyDebtAllowed = grossMonthlyIncome * maxTotalDTI;
// Calculate how much is available for a mortgage payment (PITI) after other debts
var availableForPITI = maxTotalMonthlyDebtAllowed – monthlyDebt;
// If other debts already exceed the total DTI limit, affordability is very low or zero
if (availableForPITI = 750) {
assumedAnnualInterestRate = 0.065; // Example: 6.5% for good credit
} else if (creditScore 0 && monthlyInterestRate > 0) {
var numerator = Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths);
estimatedMaxLoanAmount = estimatedMaxMonthlyMortgagePayment * (numerator / denominator);
} else if (estimatedMaxMonthlyMortgagePayment > 0 && monthlyInterestRate === 0) {
// Handle zero interest rate case (unlikely but for completeness)
estimatedMaxLoanAmount = estimatedMaxMonthlyMortgagePayment * loanTermMonths;
}
// Add down payment to the estimated maximum loan amount for the total home price
var estimatedMaxHomePrice = estimatedMaxLoanAmount + downPayment;
// Format the result
var formattedResult = estimatedMaxHomePrice.toLocaleString(undefined, {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0
});
document.getElementById("result-value").innerText = formattedResult;
}