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Home Mortgage Affordability Calculator
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How Much House Can You Afford? A Comprehensive Guide
Determining your home-buying budget is the most critical first step in the real estate journey. While many buyers focus on the total price of the home, lenders focus on your Debt-to-Income (DTI) ratio. This ratio determines how much of your monthly income is consumed by debt payments, including your future mortgage.
Understanding the 28/36 Rule
Financial experts and mortgage lenders often use the "28/36 Rule" to assess affordability:
The 28% Rule: Your total monthly mortgage payment (including principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
The 36% Rule: Your total monthly debt payments (including the new mortgage, car loans, student loans, and credit card minimums) should not exceed 36% of your gross monthly income.
Key Factors Influencing Your Budget
Beyond your salary, several variables dictate the final price tag you can manage:
Interest Rates: A 1% change in interest rates can significantly impact your purchasing power. Lower rates allow you to borrow more for the same monthly payment.
Down Payment: A larger down payment reduces your loan-to-value ratio, potentially eliminating the need for Private Mortgage Insurance (PMI) and lowering your monthly costs.
Property Taxes: These vary wildly by location. A home in a high-tax district will lower the maximum loan amount you can qualify for compared to a low-tax area.
Example Affordability Scenario
Let's look at a realistic example for a household earning $100,000 annually:
Metric
Value
Annual Gross Income
$100,000
Monthly Gross Income
$8,333
Monthly Debt (Car/Cards)
$600
Max Total Monthly Debt (36%)
$3,000
Available for Mortgage (PITI)
$2,400
In this scenario, with an interest rate of 6.5% and a $50,000 down payment, this household could likely afford a home priced around $365,000 to $385,000, depending on local tax rates.
function calculateMortgageAffordability() {
// Get values from 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 loanTermYears = parseInt(document.getElementById('loanTerm').value);
var monthlyTaxIns = parseFloat(document.getElementById('taxInsurance').value);
// Validate inputs
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || annualIncome <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
// Calculations based on the 36% DTI rule (Back-end ratio)
var monthlyGrossIncome = annualIncome / 12;
var maxTotalMonthlyPayment = monthlyGrossIncome * 0.36;
var availableForPI = maxTotalMonthlyPayment – monthlyDebt – monthlyTaxIns;
if (availableForPI <= 0) {
document.getElementById('resultArea').style.display = 'block';
document.getElementById('maxHomePrice').innerText = "Ineligible";
document.getElementById('loanAmountResult').innerText = "$0";
document.getElementById('monthlyPI').innerText = "$0";
alert("Based on your debts and income, you may not qualify for a mortgage at this time. Consider reducing debt or increasing income.");
return;
}
// Mortgage Formula: P = M * [ (1 + r)^n – 1 ] / [ r * (1 + r)^n ]
// M = available monthly payment for Principal and Interest
// r = monthly interest rate
// n = total number of months
var monthlyRate = (interestRate / 100) / 12;
var totalMonths = loanTermYears * 12;
var principalLoanAmount = availableForPI * (Math.pow(1 + monthlyRate, totalMonths) – 1) / (monthlyRate * Math.pow(1 + monthlyRate, totalMonths));
var maxHomePriceValue = principalLoanAmount + downPayment;
// Formatting currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
// Display Results
document.getElementById('resultArea').style.display = 'block';
document.getElementById('maxHomePrice').innerText = formatter.format(maxHomePriceValue);
document.getElementById('loanAmountResult').innerText = formatter.format(principalLoanAmount);
document.getElementById('monthlyPI').innerText = formatter.format(availableForPI);
// Scroll to results on mobile
document.getElementById('resultArea').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}