Determine your realistic home-buying power based on income and liabilities.
Your Capacity Analysis
Safe Monthly Housing Limit
$0
Estimated Purchase Ceiling
$0
Understanding Your First-Time Home Buyer Capacity
Calculating how much home you can afford as a first-time buyer requires more than just looking at a price tag. Lenders and financial experts use specific ratios to determine "Readiness." This calculator utilizes the industry-standard 28/36 rule to evaluate your financial health before you begin your property search.
The 28/36 Standard Explained
The 28% rule suggests that your total housing expenses (including property taxes and insurance) should not exceed 28% of your gross monthly income. The 36% rule mandates that your total debt obligations—including your new home expenses plus car loans, credit cards, and student loans—should stay below 36% of your gross monthly income.
Key Metrics in This Calculation
Annual Pre-Tax Earnings: Your total household income before taxes are deducted.
Fixed Monthly Liabilities: Recurring payments like debt that appear on your credit report.
Liquid Capital: The cash you have available for upfront costs, initial equity, and reserves.
Purchase Ceiling: An estimation of total property value you can likely sustain based on your income profile.
Realistic Example
Consider a buyer earning $80,000 annually with $500 in monthly liabilities and $30,000 in liquid capital.
1. Monthly Gross: $6,666.
2. 28% Housing Limit: $1,866.
3. 36% Total Debt Limit: ($2,400 – $500) = $1,900.
4. The lower of these two (plus the buyer's own target) determines the Safe Monthly Housing Limit.
function calculateReadiness() {
var annual = parseFloat(document.getElementById('annualEarnings').value);
var liabilities = parseFloat(document.getElementById('monthlyLiabilities').value) || 0;
var capital = parseFloat(document.getElementById('liquidCapital').value) || 0;
var target = parseFloat(document.getElementById('monthlyTarget').value);
if (isNaN(annual) || isNaN(target) || annual <= 0) {
alert("Please enter valid positive numbers for earnings and target allotment.");
return;
}
var monthlyGross = annual / 12;
var frontEndLimit = monthlyGross * 0.28;
var backEndLimit = (monthlyGross * 0.36) – liabilities;
// The Safe Limit is the lower of the target allotment, the front-end ratio, or the back-end ratio
var safeMonthly = Math.min(target, frontEndLimit, backEndLimit);
if (safeMonthly 20) {
statusDiv.style.backgroundColor = '#fff3cd';
statusDiv.style.color = '#856404';
statusDiv.innerText = "Readiness Rating: Moderate. Your current liabilities consume " + dti.toFixed(1) + "% of your gross income.";
} else {
statusDiv.style.backgroundColor = '#d4edda';
statusDiv.style.color = '#155724';
statusDiv.innerText = "Readiness Rating: Strong. Your low liability-to-income ratio puts you in an excellent position.";
}
breakdown.innerHTML = "How we calculated this: Based on your income, the 28% rule limits your housing cost to $" + frontEndLimit.toFixed(0) + ". After subtracting your $" + liabilities + " monthly bills, the 36% rule limits you to $" + backEndLimit.toFixed(0) + ". We used the most conservative value to ensure financial stability.";
document.getElementById('resultArea').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}