Home Affordability Calculator: How Much House Can You Buy?
Determining "how much house can I afford?" is the crucial first step in the homebuying process. Before looking at listings or attending open houses, it is essential to understand your budget based on your income, existing debts, and down payment savings.
This specific Home Affordability Calculator uses standard lender guidelines, primarily focusing on the Debt-to-Income (DTI) ratio, to estimate a realistic maximum purchase price. Most conventional lenders prefer that your total monthly debts (including the new mortgage payment, property taxes, insurance, plus existing debts like car loans and credit cards) do not exceed 36% of your pre-tax monthly income.
Key Factors Influencing Your Affordability
- Gross Annual Income: Your total income before taxes. Lenders use this as the baseline for calculating what you can handle monthly.
- Monthly Debts: This includes minimum payments on credit cards, student loans, auto loans, alimony, or child support. It does not include utilities or groceries.
- Down Payment: A larger down payment reduces the loan amount needed, lowers monthly payments, and often secures a better interest rate.
- Interest Rate & Term: Even small changes in interest rates can significantly impact your monthly purchasing power. The loan term (e.g., 15 vs. 30 years) also dictates the monthly obligation.
- Taxes and Insurance (PITI): A mortgage payment isn't just principal and interest. Property taxes and homeowners insurance make up a significant portion of your monthly housing costs (collectively known as PITI).
Calculate Your Maximum Home Price
30 Years
20 Years
15 Years
Affordability Estimate
Based on a 36% back-end DTI ratio:
Max Loan Amount:
Max Monthly PITI Payment:
Understanding the Results
The calculator estimates the maximum home price based on your inputs and standard lending criteria. The "Max Monthly PITI Payment" includes Principal, Interest, Taxes, and Insurance. It is crucial to remember that this is an estimate, not a loan guarantee. Final approval depends on credit scores, employment history, and current market interest rates.
function calculateAffordability() { // 1. Get Inputs and validate var grossIncomeStr = document.getElementById('affGrossIncome').value; var monthlyDebtsStr = document.getElementById('affMonthlyDebts').value; var downPaymentStr = document.getElementById('affDownPayment').value; var interestRateStr = document.getElementById('affInterestRate').value; var loanTermStr = document.getElementById('affLoanTerm').value; var annualTaxStr = document.getElementById('affAnnualTax').value; var annualInsuranceStr = document.getElementById('affAnnualInsurance').value; // Ensure numbers are valid floats, default to 0 if empty or invalid var grossIncome = parseFloat(grossIncomeStr) || 0; var monthlyDebts = parseFloat(monthlyDebtsStr) || 0; var downPayment = parseFloat(downPaymentStr) || 0; var interestRate = parseFloat(interestRateStr) || 0; var loanTermYears = parseInt(loanTermStr) || 30; var annualTax = parseFloat(annualTaxStr) || 0; var annualInsurance = parseFloat(annualInsuranceStr) || 0; // Basic validation to prevent nonsensical results if (grossIncome <= 0 || interestRate <= 0) { alert("Please enter a valid positive Gross Income and Interest Rate."); return; } // 2. Define Constants for Calculation // Using 36% as the standard maximum back-end DTI (Total Debt / Gross Income) var maxBackEndDTI = 0.36; // 3. Perform Calculations // Calculate monthly gross income var monthlyGrossIncome = grossIncome / 12; // Calculate maximum allowable total monthly debt payments (housing + non-housing) var maxTotalMonthlyDebtAllowed = monthlyGrossIncome * maxBackEndDTI; // Calculate maximum allowable monthly housing payment (PITI) // This is total allowed debt minus existing non-housing debts var maxAllowedPITI = maxTotalMonthlyDebtAllowed – monthlyDebts; // Edge case: If existing debts are too high, affordability is practically zero. if (maxAllowedPITI <= 0) { document.getElementById('affResult').style.display = 'block'; document.getElementById('maxHomePriceResult').innerHTML = "$0"; document.getElementById('maxLoanResult').innerHTML = "$0"; document.getElementById('maxMonthlyPaymentResult').innerHTML = "$0"; return; } // Calculate monthly costs for Taxes and Insurance (T&I) var monthlyTaxAndInsurance = (annualTax + annualInsurance) / 12; // Calculate maximum payment available for Principal and Interest (PI) // PITI minus T&I leaves PI var maxAllowedPI = maxAllowedPITI – monthlyTaxAndInsurance; var maxLoanAmount = 0; var maxHomePrice = 0; // If T&I consume the entire budget, loan amount is 0, price is just down payment. if (maxAllowedPI <= 0) { maxLoanAmount = 0; maxHomePrice = downPayment; // Max PITI is effectively capped at T&I if PI is 0, or whatever small amount was left maxAllowedPITI = Math.min(maxAllowedPITI, monthlyTaxAndInsurance); } else { // Calculate Maximum Loan Amount based on Max Allowed PI payment // Using the Present Value of an Annuity Formula rearranged: // PV = PMT * [ (1 – (1+r)^-n) / r ] var monthlyRate = (interestRate / 100) / 12; var totalMonths = loanTermYears * 12; // Calculate the discount factor: (1 – (1+r)^-n) var discountFactor = 1 – Math.pow((1 + monthlyRate), -totalMonths); // Calculate Max Loan Amount maxLoanAmount = maxAllowedPI * (discountFactor / monthlyRate); // Calculate Max Home Price maxHomePrice = maxLoanAmount + downPayment; } // 4. Format and Display Results var formatter = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0, }); document.getElementById('maxHomePriceResult').innerHTML = formatter.format(maxHomePrice); document.getElementById('maxLoanResult').innerHTML = formatter.format(maxLoanAmount); document.getElementById('maxMonthlyPaymentResult').innerHTML = formatter.format(maxAllowedPITI) + "/mo"; // Show results container document.getElementById('affResult').style.display = 'block'; }