Determining your home buying power is the first critical step in the home purchasing journey. Unlike a simple mortgage calculator which tells you the payment for a specific loan amount, this House Affordability Calculator works backward from your income and debts to determine the maximum property price you can reasonably manage.
The 28/36 Rule Explained
Lenders typically use two main ratios to decide how much money they will lend you. This calculator utilizes the standard 28/36 rule, which is the industry benchmark for conventional loans:
Front-End Ratio (28%): Your monthly housing costs (principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
Back-End Ratio (36%): Your total monthly debt payments (housing costs plus credit cards, student loans, car payments, etc.) should not exceed 36% of your gross monthly income.
This calculator determines the maximum monthly payment allowed by both ratios and uses the lower of the two (the more conservative figure) to calculate your maximum home price.
Factors That Impact Your Affordability
Several variables can significantly change the results displayed above:
Interest Rates: A higher interest rate increases your monthly payment, which drastically reduces the total loan amount you qualify for. Even a 1% difference can change your buying power by tens of thousands of dollars.
Existing Debt: High monthly obligations (like a large car payment) reduce your "Back-End" ratio allowance. Paying off a monthly debt is often the fastest way to increase your home buying budget.
Down Payment: The more cash you put down upfront, the higher the home price you can afford, as the loan amount required is smaller relative to the price.
Estimating Taxes and Insurance
Remember that your monthly mortgage check isn't just for the loan. It usually includes an escrow portion for property taxes and homeowners insurance. In high-tax areas, these costs can significantly eat into your buying power. We recommend researching local property tax rates to input an accurate estimate in the calculator above.
function calculateAffordability() {
// Get input values
var income = parseFloat(document.getElementById('annualIncome').value);
var debts = parseFloat(document.getElementById('monthlyDebts').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseFloat(document.getElementById('loanTerm').value);
var monthlyTax = parseFloat(document.getElementById('monthlyTax').value);
// Basic Validation
var errorDiv = document.getElementById('errorDisplay');
var resultDiv = document.getElementById('resultContainer');
if (isNaN(income) || isNaN(debts) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(monthlyTax)) {
errorDiv.style.display = 'block';
resultDiv.style.display = 'none';
return;
}
errorDiv.style.display = 'none';
// Calculate Monthly Income
var monthlyIncome = income / 12;
// Calculate Limits based on 28/36 Rule
// 1. Front-end limit: Housing costs <= 28% of income
var maxHousingFront = monthlyIncome * 0.28;
// 2. Back-end limit: Total debts <= 36% of income
// Total debts = Housing costs + Other debts
// Therefore: Max Housing = (Income * 0.36) – Other Debts
var maxHousingBack = (monthlyIncome * 0.36) – debts;
// The lender will use the LOWER of the two limits
var maxAllowedMonthlyPayment = Math.min(maxHousingFront, maxHousingBack);
// Ensure we don't have a negative payment ability (high debts)
if (maxAllowedMonthlyPayment <= 0) {
document.getElementById('homePriceResult').innerText = "$0";
document.getElementById('monthlyPaymentResult').innerText = "$0";
resultDiv.style.display = 'block';
return;
}
// Subtract Taxes and Insurance to find amount available for Principal & Interest (P&I)
var availableForPI = maxAllowedMonthlyPayment – monthlyTax;
if (availableForPI <= 0) {
// Can afford tax/ins but not the loan itself
document.getElementById('homePriceResult').innerText = "Insufficient Income";
document.getElementById('monthlyPaymentResult').innerText = "$" + Math.round(maxAllowedMonthlyPayment).toLocaleString();
resultDiv.style.display = 'block';
return;
}
// Calculate Maximum Loan Amount based on P&I available
// Formula: P = (M * (1 – (1 + r)^-n)) / r
var r = (interestRate / 100) / 12; // Monthly interest rate
var n = loanTerm * 12; // Total number of payments
var maxLoanAmount = 0;
if (interestRate === 0) {
maxLoanAmount = availableForPI * n;
} else {
maxLoanAmount = (availableForPI * (1 – Math.pow(1 + r, -n))) / r;
}
// Total Home Price = Max Loan + Down Payment
var maxHomePrice = maxLoanAmount + downPayment;
// Formatting Output
document.getElementById('homePriceResult').innerText = "$" + Math.round(maxHomePrice).toLocaleString();
document.getElementById('monthlyPaymentResult').innerText = "$" + Math.round(maxAllowedMonthlyPayment).toLocaleString();
// Show results
resultDiv.style.display = 'block';
}