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Home Affordability Calculator

Estimated Affordable Home Price

$0
Maximum Monthly PITI: $0
Loan Amount: $0
Monthly Property Tax/Ins: $0

How Much House Can You Actually Afford?

Determining your home buying budget is more complex than simply looking at your savings. Lenders use specific financial ratios to decide how much they are willing to lend you. The most critical metric is the Debt-to-Income (DTI) ratio.

Understanding the 28/36 Rule

Most financial experts and lenders follow the "28/36 rule" to determine affordability:

  • 28% Front-End Ratio: Your total monthly housing expense (Principal, Interest, Taxes, and Insurance – PITI) should not exceed 28% of your gross monthly income.
  • 36% Back-End Ratio: Your total debt obligations (including the new mortgage plus car loans, student loans, and credit cards) should not exceed 36% of your gross monthly income.

Factors That Influence Your Home Budget

1. Interest Rates: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars. Higher rates mean higher monthly payments for the same loan amount.

2. The Down Payment: A larger down payment reduces your loan amount and can eliminate the need for Private Mortgage Insurance (PMI), which typically costs between 0.5% and 1.5% of the loan amount annually.

3. Property Taxes and Insurance: These "hidden" costs vary significantly by location. Our calculator includes an estimated 1.2% tax rate and standard insurance costs to provide a more realistic monthly total.

Realistic Example

If you earn $100,000 per year with $500 in monthly debt and have a $50,000 down payment, at a 7% interest rate, you could likely afford a home priced around $380,000. This keeps your total monthly payment around $2,300, which aligns with standard lending guidelines.

function calculateAffordability() { var annualIncome = parseFloat(document.getElementById('annualIncome').value); var monthlyDebt = parseFloat(document.getElementById('monthlyDebt').value); var downPayment = parseFloat(document.getElementById('downPayment').value); var annualInterest = parseFloat(document.getElementById('interestRate').value); var years = parseInt(document.getElementById('loanTerm').value); var taxRate = parseFloat(document.getElementById('propertyTax').value) / 100; if (isNaN(annualIncome) || isNaN(downPayment) || isNaN(annualInterest)) { alert("Please enter valid numerical values."); return; } var monthlyIncome = annualIncome / 12; // Calculate max PITI based on 28/36 rule var maxPitiFrontEnd = monthlyIncome * 0.28; var maxPitiBackEnd = (monthlyIncome * 0.36) – monthlyDebt; // Lenders take the lower of the two var maxMonthlyPITI = Math.min(maxPitiFrontEnd, maxPitiBackEnd); if (maxMonthlyPITI <= 0) { alert("Based on your debt-to-income ratio, a mortgage is currently not recommended. Try reducing monthly debts first."); return; } // Estimate Insurance and Tax as part of PITI // Rough estimate: Tax + Insurance usually accounts for ~25% of PITI var monthlyTaxAndInsEstimate = maxMonthlyPITI * 0.25; var monthlyPrincipalInterest = maxMonthlyPITI – monthlyTaxAndInsEstimate; // Loan Amount Formula: P = M / [i(1+i)^n / ((1+i)^n – 1)] var monthlyInterestRate = (annualInterest / 100) / 12; var numberOfPayments = years * 12; var loanAmount = monthlyPrincipalInterest * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)); var affordableHomePrice = loanAmount + downPayment; // Formatting document.getElementById('resHomePrice').innerText = '$' + Math.round(affordableHomePrice).toLocaleString(); document.getElementById('resMonthlyPayment').innerText = '$' + Math.round(maxMonthlyPITI).toLocaleString(); document.getElementById('resLoanAmount').innerText = '$' + Math.round(loanAmount).toLocaleString(); document.getElementById('resTaxIns').innerText = '$' + Math.round(monthlyTaxAndInsEstimate).toLocaleString(); document.getElementById('affordabilityResults').style.display = 'block'; // Smooth scroll to result document.getElementById('affordabilityResults').scrollIntoView({ behavior: 'smooth', block: 'nearest' }); }

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