Determining your budget is the first critical step in the home buying process. This House Affordability Calculator helps you estimate the maximum purchase price you can manage based on your income, existing debts, and the specific terms of a potential mortgage.
How is Home Affordability Calculated?
Lenders primarily look at two metrics when deciding how much to lend you, known as your Debt-to-Income (DTI) ratios:
Front-End Ratio: This is the percentage of your gross monthly income that goes towards housing costs (mortgage principal, interest, property taxes, and insurance). A common conservative limit is 28%.
Back-End Ratio: This represents the percentage of your gross monthly income that goes towards all debt obligations, including housing costs, credit cards, student loans, and car payments. A common conservative limit is 36%.
Our calculator determines your maximum monthly housing allowance by taking the lower of these two limits to ensure you don't overstretch your budget.
Key Factors Influencing Your Budget
Several variables dramatically affect your purchasing power:
Interest Rate: Even a small increase in interest rates can significantly increase your monthly payment, reducing the total loan amount you qualify for.
Down Payment: A larger down payment reduces the loan amount required, lowering monthly payments and potentially removing the need for Private Mortgage Insurance (PMI).
Property Taxes: High local tax rates can eat into your monthly payment capacity, lowering the "sticker price" of the home you can afford.
Current Debts: Reducing monthly obligations like car loans or credit card minimums frees up more income for a mortgage qualification.
Conservative vs. Aggressive Affordability
The "Strictness" option in the calculator allows you to toggle between standard conservative lending guidelines (28% housing / 36% total debt) and more aggressive guidelines (36% housing / 43% total debt) used by some FHA loans or lenders in competitive markets. While you may qualify for the aggressive amount, sticking to the conservative estimate is often safer for long-term financial health.
Next Steps
Once you have an estimate, we recommend getting a pre-approval letter from a lender. This verifies your income and credit score, giving you a solid number to present to sellers when you are ready to make an offer.
function calculateAffordability() {
// 1. Get Input Values
var annualIncome = parseFloat(document.getElementById('annualIncome').value);
var monthlyDebts = parseFloat(document.getElementById('monthlyDebts').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTermYears = parseInt(document.getElementById('loanTerm').value);
var propertyTaxRate = parseFloat(document.getElementById('propertyTaxRate').value);
var annualHomeInsurance = parseFloat(document.getElementById('homeInsurance').value);
var dtiLimit = document.getElementById('dtiLimit').value;
// 2. Validate Inputs
if (isNaN(annualIncome) || annualIncome <= 0) {
alert("Please enter a valid annual income.");
return;
}
if (isNaN(monthlyDebts)) monthlyDebts = 0;
if (isNaN(downPayment)) downPayment = 0;
if (isNaN(interestRate)) interestRate = 0;
if (isNaN(propertyTaxRate)) propertyTaxRate = 0;
if (isNaN(annualHomeInsurance)) annualHomeInsurance = 0;
// 3. Determine DTI Ratios
var frontEndRatio = 0.28;
var backEndRatio = 0.36;
if (dtiLimit === 'aggressive') {
frontEndRatio = 0.36;
backEndRatio = 0.43;
}
// 4. Calculate Max Allowable Monthly Payment
var monthlyGrossIncome = annualIncome / 12;
// Limit 1: Housing specific limit
var maxHousingPaymentFront = monthlyGrossIncome * frontEndRatio;
// Limit 2: Total debt limit (Housing + Debts)
var maxTotalDebtPayment = monthlyGrossIncome * backEndRatio;
var maxHousingPaymentBack = maxTotalDebtPayment – monthlyDebts;
// The actual limit is the lower of the two
var maxMonthlyPayment = Math.min(maxHousingPaymentFront, maxHousingPaymentBack);
// If debts are too high, result might be negative
if (maxMonthlyPayment <= 0) {
document.getElementById('results-area').style.display = 'block';
document.getElementById('maxHomePrice').innerHTML = "$0";
document.getElementById('resultLoanAmount').innerHTML = "$0";
document.getElementById('resultPI').innerHTML = "$0";
document.getElementById('resultTax').innerHTML = "$0";
document.getElementById('resultIns').innerHTML = "$0";
document.getElementById('resultTotal').innerHTML = "$0";
return;
}
// 5. Solve for Home Price
// Formula variables:
// P = Home Price (Unknown)
// L = Loan Amount = P – DownPayment
// r = Monthly Interest Rate
// n = Number of payments
// T = Monthly Tax = (P * TaxRate) / 12
// I = Monthly Insurance = AnnualIns / 12
// M_total = (L * MortgageFactor) + T + I
// We need to find P.
// M_total = ((P – Down) * MortgageFactor) + (P * MonthlyTaxRate) + MonthlyIns
// M_total – MonthlyIns = P * MortgageFactor – Down * MortgageFactor + P * MonthlyTaxRate
// M_total – MonthlyIns + (Down * MortgageFactor) = P * (MortgageFactor + MonthlyTaxRate)
// P = (M_total – MonthlyIns + (Down * MortgageFactor)) / (MortgageFactor + MonthlyTaxRate)
var r = (interestRate / 100) / 12;
var n = loanTermYears * 12;
var monthlyTaxRate = (propertyTaxRate / 100) / 12;
var monthlyIns = annualHomeInsurance / 12;
var mortgageFactor = 0;
if (interestRate === 0) {
mortgageFactor = 1 / n;
} else {
mortgageFactor = (r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1);
}
// Available budget for P&I + Tax
var availableBudget = maxMonthlyPayment – monthlyIns;
// Calculate Price
// Numerator: AvailableBudget + (DownPayment * MortgageFactor)
// Denominator: MortgageFactor + MonthlyTaxRate
var maxHomePrice = 0;
if (availableBudget < 0) {
maxHomePrice = 0;
} else {
var numerator = availableBudget + (downPayment * mortgageFactor);
var denominator = mortgageFactor + monthlyTaxRate;
maxHomePrice = numerator / denominator;
}
// Edge case: if Price < Down Payment, math gets weird because negative loan.
// In reality, if you have enough cash, you are limited only by cash.
// But this calculator assumes a mortgage.
// If calculated price < down payment, it means the fees/tax exceed budget even with 0 loan.
// We will stick to the formula but ensure non-negative.
if (maxHomePrice < 0) maxHomePrice = 0;
// 6. Calculate breakdown based on Max Home Price
var loanAmount = Math.max(0, maxHomePrice – downPayment);
var monthlyTax = maxHomePrice * monthlyTaxRate;
var monthlyPI = loanAmount * mortgageFactor;
// Total should match maxMonthlyPayment closely
var totalMonthly = monthlyPI + monthlyTax + monthlyIns;
// 7. Format Output
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('maxHomePrice').innerHTML = formatter.format(maxHomePrice);
document.getElementById('resultLoanAmount').innerHTML = formatter.format(loanAmount);
document.getElementById('resultPI').innerHTML = formatter.format(monthlyPI);
document.getElementById('resultTax').innerHTML = formatter.format(monthlyTax);
document.getElementById('resultIns').innerHTML = formatter.format(monthlyIns);
document.getElementById('resultTotal').innerHTML = formatter.format(totalMonthly);
document.getElementById('results-area').style.display = 'block';
}