Estimate the maximum home price you can afford based on your income, debts, and savings.
15 Years
30 Years
Maximum Affordable Home Price:
Understanding Your Home Affordability
Buying a home is a significant financial decision, and understanding how much you can realistically afford is crucial. This calculator helps you estimate the maximum home price you could potentially purchase, taking into account your income, existing financial obligations, and the costs associated with homeownership.
How the Affordability Calculation Works
This calculator uses a common guideline to determine affordability, focusing on the Debt-to-Income (DTI) ratio and the upfront costs. While lenders consider various factors, this tool provides a good initial estimate.
Key Inputs and Their Importance:
Annual Household Income: This is the primary driver of affordability. Lenders generally want your total housing costs (mortgage payment, taxes, insurance, HOA) to be no more than 28-31% of your gross monthly income, and your total debt (including housing) to be no more than 36-43% of your gross monthly income.
Total Monthly Debt Payments: This includes existing loans (car, student, personal), minimum credit card payments, and other recurring debts. These are subtracted from your income to determine how much is available for a mortgage.
Total Savings: This covers your down payment, closing costs (appraisal fees, title insurance, legal fees, etc.), and potentially some reserve funds. A larger down payment can reduce your loan amount and monthly payments.
Property Tax Rate: Taxes are a significant part of your monthly housing expense. The rate is usually expressed as a percentage of the home's assessed value.
Homeowners Insurance: This is required by lenders to protect against damage to the property. Costs vary based on location, coverage, and deductible.
Monthly HOA Fees: If you're buying a condo or a home in a planned community, these fees cover shared amenities and maintenance.
Mortgage Interest Rate: This greatly impacts your monthly Principal and Interest (P&I) payment. Higher rates mean higher payments for the same loan amount.
Mortgage Loan Term: Shorter terms (like 15 years) result in higher monthly payments but less interest paid overall. Longer terms (like 30 years) have lower monthly payments but more interest over time.
The Calculation Logic (Simplified):
Gross Monthly Income: Calculate (Annual Household Income / 12).
Maximum Housing Payment (PITI + HOA): A common guideline is to limit the total monthly housing cost (Principal, Interest, Taxes, Insurance, plus HOA fees) to approximately 28-31% of your gross monthly income. We'll use 30% as a benchmark here.
Estimate Maximum Monthly P&I: Subtract estimated monthly taxes, insurance, and HOA fees from the maximum housing payment.
So, Max P&I = (Gross Monthly Income * 0.30) – Monthly Taxes – Monthly Insurance – Monthly HOA. Ensure this value is not negative.
Calculate Maximum Loan Amount: Using a mortgage payment formula (and the provided interest rate and loan term), we can work backward to find the maximum loan amount that results in the calculated Max P&I. The formula for the monthly mortgage payment (M) is:
$M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]$
Where:
n = total number of payments (Loan Term in Years * 12)
We rearrange this to solve for P (Principal Loan Amount):
$P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]$
Maximum Affordable Home Price: Add the calculated maximum loan amount to your available down payment savings.
Important Considerations:
This calculator provides an estimate. Actual affordability depends on many factors, including your credit score, lender requirements, specific loan programs, and personal financial goals. It's always recommended to speak with a mortgage professional for a personalized assessment.
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var propertyTaxRate = parseFloat(document.getElementById("propertyTaxRate").value);
var homeownersInsurance = parseFloat(document.getElementById("homeownersInsurance").value);
var hoaFees = parseFloat(document.getElementById("hoaFees").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var resultElement = document.getElementById("result");
var affordablePriceElement = document.getElementById("affordablePrice");
// Clear previous results and hide
resultElement.style.display = "none";
affordablePriceElement.textContent = "";
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(propertyTaxRate) || propertyTaxRate < 0 ||
isNaN(homeownersInsurance) || homeownersInsurance < 0 ||
isNaN(hoaFees) || hoaFees < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
// — Calculation Logic —
// 1. Gross Monthly Income
var grossMonthlyIncome = annualIncome / 12;
// 2. Maximum Housing Payment (PITI + HOA) – Using 30% of gross monthly income
var maxHousingPayment = grossMonthlyIncome * 0.30;
// 3. Estimate Monthly Costs (Taxes, Insurance, HOA) – Assuming a placeholder home price for tax calculation initially, or using an iterative approach.
// A common approach is to use a target DTI for total debt.
// Let's refine this. We want to find a Home Price (HP) such that:
// P&I(HP) + Taxes(HP) + Insurance + HOA <= maxHousingPayment
// P&I(HP) = Mortgage Payment for HP – downPayment
// Taxes(HP) = (HP * propertyTaxRate / 100) / 12
// This requires an iterative or algebraic solution for Home Price.
// A simpler, widely used approach is to assume a maximum P&I payment first, then add down payment.
// Let's use the common rule of thumb: Total Debt (incl. Housing) shouldn't exceed ~43% of gross monthly income.
var maxTotalDebtPayment = grossMonthlyIncome * 0.43;
var availableForMortgageAndOtherDebts = maxTotalDebtPayment – monthlyDebtPayments;
// If availableForMortgageAndOtherDebts is negative, it means current debts are too high for this income bracket.
if (availableForMortgageAndOtherDebts < 0) {
availableForMortgageAndOtherDebts = 0; // Can't afford any mortgage payment
}
// Now, availableForMortgageAndOtherDebts needs to cover PITI + HOA.
// Let's target the Max P&I payment by subtracting estimated taxes, insurance, HOA from the available amount.
// This is tricky because taxes depend on the Home Price.
// Alternative simplified approach: Estimate max P&I payment directly.
// The Max Housing Payment (from step 2) is the target for PITI + HOA.
// Let's assume the P&I component is a significant part of this.
// We will use an iterative approach to find the home price.
var maxAffordablePrice = 0;
var maxLoanAmount = 0;
var calculatedMaxPI = 0; // Maximum Principal & Interest payment affordable
// Initialize monthly estimates based on a guess or down payment, then iterate.
// Let's assume a starting home price to estimate taxes and then calculate backwards.
// A reasonable starting point for Home Price could be `downPayment * 5` or `annualIncome * 1.5`.
var initialGuessHP = Math.max(downPayment * 5, annualIncome * 1.5);
// Iterative calculation to find the Home Price
var tolerance = 0.01; // Tolerance for price convergence
var maxIterations = 100;
var iteration = 0;
var currentHP = initialGuessHP;
var previousHP = 0;
while (iteration tolerance) {
previousHP = currentHP;
var monthlyTaxes = (currentHP * propertyTaxRate / 100) / 12;
var monthlyInsurance = homeownersInsurance / 12;
var monthlyHOA = hoaFees;
// Ensure we don't exceed the max housing payment constraint
var estimatedTotalHousingCost = monthlyTaxes + monthlyInsurance + monthlyHOA;
if (estimatedTotalHousingCost >= maxHousingPayment) {
// If taxes/insurance/HOA alone exceed the max housing budget, affordability is 0 or very low.
// We need to ensure P&I can be calculated. Let's set maxPI to a very small positive number if needed.
calculatedMaxPI = Math.max(0.01, maxHousingPayment – estimatedTotalHousingCost);
} else {
calculatedMaxPI = maxHousingPayment – estimatedTotalHousingCost;
}
// Calculate the maximum loan amount based on the affordable P&I payment
var i = (interestRate / 100) / 12; // monthly interest rate
var n = loanTerm * 12; // total number of payments
if (i > 0 && n > 0 && calculatedMaxPI > 0) {
maxLoanAmount = calculatedMaxPI * (Math.pow(1 + i, n) – 1) / (i * Math.pow(1 + i, n));
} else {
maxLoanAmount = 0;
}
// Update the current home price estimate
currentHP = maxLoanAmount + downPayment;
iteration++;
}
maxAffordablePrice = currentHP;
// Final check: ensure the calculated price doesn't lead to negative P&I or exceed budget constraints implicitly.
// If maxAffordablePrice is very low or negative due to constraints, set to 0.
if (isNaN(maxAffordablePrice) || maxAffordablePrice < 0) {
maxAffordablePrice = 0;
}
// Display the result
var formattedPrice = maxAffordablePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
affordablePriceElement.textContent = formattedPrice;
resultElement.style.display = "block";
}