*Payment includes Principal, Interest, Taxes, and Insurance (PITI).
function calculateAffordability() {
// Get inputs
var annualIncome = parseFloat(document.getElementById('annualIncome').value);
var monthlyDebt = parseFloat(document.getElementById('monthlyDebt').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseInt(document.getElementById('loanTerm').value);
var propertyTax = parseFloat(document.getElementById('propertyTax').value);
var homeInsurance = parseFloat(document.getElementById('homeInsurance').value);
var dtiType = document.getElementById('dtiRatio').value;
// Validation
if (isNaN(annualIncome) || isNaN(downPayment) || isNaN(interestRate) || annualIncome <= 0) {
alert("Please enter valid positive numbers for Income, Down Payment, and Interest Rate.");
return;
}
if (isNaN(monthlyDebt)) monthlyDebt = 0;
if (isNaN(propertyTax)) propertyTax = 3000;
if (isNaN(homeInsurance)) homeInsurance = 1000;
// Determine DTI Ratios based on selection
var frontEndRatio = 0.28;
var backEndRatio = 0.43; // Standard FHA/Conventional limit
if (dtiType === 'conservative') {
frontEndRatio = 0.28;
backEndRatio = 0.36;
} else if (dtiType === 'aggressive') {
frontEndRatio = 0.36;
backEndRatio = 0.50;
}
// Monthly Income
var monthlyIncome = annualIncome / 12;
// Calculate Max Allowable Monthly Payment (PITI)
// 1. Based on Front End (Housing only)
var maxHousingPaymentFront = monthlyIncome * frontEndRatio;
// 2. Based on Back End (Total Debt)
var maxTotalDebtPayment = monthlyIncome * backEndRatio;
var maxHousingPaymentBack = maxTotalDebtPayment – monthlyDebt;
// The limiting factor is the lower of the two
var maxAllowedPITI = Math.min(maxHousingPaymentFront, maxHousingPaymentBack);
if (maxAllowedPITI <= 0) {
alert("Based on your monthly debts and income, it appears you may not qualify for a mortgage at this time.");
return;
}
// Subtract Taxes and Insurance to get Principal & Interest (PI) portion
var monthlyTax = propertyTax / 12;
var monthlyInsurance = homeInsurance / 12;
var maxAllowedPI = maxAllowedPITI – monthlyTax – monthlyInsurance;
if (maxAllowedPI <= 0) {
alert("Property taxes and insurance exceed your maximum allowable payment based on DTI ratios.");
return;
}
// Calculate Max Loan Amount from PI
// Formula: P = (r * PV) / (1 – (1 + r)^-n)
// Inverse: PV = (P * (1 – (1 + r)^-n)) / r
var monthlyRate = (interestRate / 100) / 12;
var numPayments = loanTerm * 12;
var maxLoanAmount = 0;
if (interestRate === 0) {
maxLoanAmount = maxAllowedPI * numPayments;
} else {
maxLoanAmount = (maxAllowedPI * (1 – Math.pow(1 + monthlyRate, -numPayments))) / monthlyRate;
}
// Max Home Price
var maxHomePrice = maxLoanAmount + downPayment;
// Estimate Closing Costs (approx 3% of home price)
var closingCosts = maxHomePrice * 0.03;
// Formatting function
function formatCurrency(num) {
return "$" + num.toLocaleString('en-US', {minimumFractionDigits: 0, maximumFractionDigits: 0});
}
// Display Results
document.getElementById('maxHomePrice').innerText = formatCurrency(maxHomePrice);
document.getElementById('monthlyPayment').innerText = formatCurrency(maxAllowedPITI);
document.getElementById('loanAmountResult').innerText = formatCurrency(maxLoanAmount);
document.getElementById('downPaymentResult').innerText = formatCurrency(downPayment);
document.getElementById('closingCostsResult').innerText = formatCurrency(closingCosts);
document.getElementById('results').style.display = "block";
}
Understanding Your Home Affordability
Buying a home is one of the largest financial decisions you will make. Determining "how much house can I afford" is the critical first step before browsing listings or contacting real estate agents. This calculator uses standard lender formulas to estimate your buying power based on income, debt, and current interest rates.
The 28/36 Rule and DTI
Lenders primarily look at your Debt-to-Income (DTI) ratio to determine eligibility. There are two types of DTI ratios:
Front-End Ratio: The percentage of your gross monthly income that goes toward housing costs (Principal, Interest, Taxes, Insurance). Most lenders prefer this to be under 28%.
Back-End Ratio: The percentage of your gross income that goes toward all debt obligations, including housing, credit cards, student loans, and car payments. A ratio under 36% is ideal, though some programs allow up to 43% or even 50%.
Pro Tip: Just because a lender approves you for a certain amount doesn't mean you should spend that much. Consider your lifestyle, savings goals, and maintenance costs when setting your budget.
Factors Affecting Affordability
Several variables impact how much home you can purchase:
Interest Rates: A higher interest rate increases your monthly payment, significantly reducing your purchasing power. A 1% increase in rates can reduce your buying power by 10% or more.
Down Payment: A larger down payment reduces the loan amount needed, lowering monthly payments and potentially avoiding Private Mortgage Insurance (PMI).
Monthly Debts: Reducing existing debt (like paying off a car loan) frees up more income for mortgage qualification.
Property Taxes: High-tax areas reduce the amount of monthly payment available for the mortgage principal, lowering the total home price you can afford.
Estimating Closing Costs
Remember to budget for closing costs, which typically range from 2% to 5% of the purchase price. These are separate from your down payment and include appraisal fees, title insurance, and loan origination fees.