Includes car loans, student loans, credit card minimums, etc. Excludes rent.
Your Affordability Estimate:
Enter your details and click "Calculate" to see your estimated affordability.
Understanding How Much House You Can Afford
Determining how much house you can truly afford is one of the most critical steps in the home-buying process. It's not just about the sticker price of a home; it's about your overall financial health and your ability to comfortably manage monthly housing expenses without undue stress. This calculator helps you estimate your affordability based on common financial guidelines.
Key Factors in Home Affordability
Lenders typically use several metrics to assess how much they are willing to lend you. The most common are Debt-to-Income (DTI) ratios:
Front-End DTI (Housing Ratio): This ratio compares your total monthly housing costs (including principal, interest, property taxes, and home insurance – often called PITI, plus any HOA fees) to your gross monthly income. Many lenders prefer this ratio to be no more than 28%.
Back-End DTI (Total Debt Ratio): This ratio considers all your monthly debt payments – including your estimated housing costs and all other recurring debts (car loans, student loans, credit card minimums, etc.) – against your gross monthly income. This ratio is often capped around 36% to 43%, depending on the loan type and lender.
Our calculator uses these industry-standard ratios (specifically, 28% for front-end and 36% for back-end DTI) to determine your maximum affordable monthly housing payment.
Beyond DTI: Other Important Considerations
Your Income: Your annual gross income is the foundation of your affordability. The higher your stable income, the more you can generally afford.
Other Debts: Existing monthly debt obligations significantly impact your capacity for a mortgage. High car payments or student loan debts will reduce the amount you can borrow for a home.
Property Taxes: These are recurring costs set by local governments and can vary widely. They are a non-negotiable part of your monthly housing expense.
Home Insurance: Protects your home from damage and is typically required by lenders. Like taxes, it's a mandatory monthly cost.
HOA Fees: If you're considering a condo, townhouse, or a home in a planned community, you'll likely have Homeowners Association (HOA) fees. These cover maintenance of common areas and amenities and add to your monthly housing bill.
Mortgage Duration: The length of your mortgage (e.g., 15, 20, or 30 years) impacts your monthly payment. A longer duration typically means lower monthly payments but more interest paid over the life of the loan.
Initial Equity Contribution: While not an input in this specific calculator, a larger initial equity contribution (down payment) reduces the amount you need to borrow, thereby lowering your monthly principal and interest payments. This calculator assumes a 20% initial equity contribution for its house price estimation.
Estimated Financing Rate: The rate at which you borrow money significantly affects your monthly payment. This calculator uses an assumed financing rate of 7% for its estimations. Actual rates will vary based on market conditions, your credit score, and the lender.
How This Calculator Works
This tool first calculates your maximum affordable monthly housing payment based on your income and existing debts, applying the DTI rules. Then, using an assumed financing rate (7%) and a typical initial equity contribution (20%), it works backward to estimate the maximum house price you might be able to afford. Remember, these are estimates to guide your home search.
Important Disclaimer
This calculator provides an estimate based on common lending guidelines and assumptions. Your actual affordability may vary based on your credit score, specific lender requirements, current market interest rates, and other financial factors. It's always recommended to get pre-approved by a lender for a precise understanding of your borrowing capacity.
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function calculateAffordability() {
// Get input values
var annualGrossIncome = parseFloat(document.getElementById('annualGrossIncome').value);
var monthlyOtherDebts = parseFloat(document.getElementById('monthlyOtherDebts').value);
var estimatedMonthlyPropertyTaxes = parseFloat(document.getElementById('estimatedMonthlyPropertyTaxes').value);
var estimatedMonthlyHomeInsurance = parseFloat(document.getElementById('estimatedMonthlyHomeInsurance').value);
var estimatedMonthlyHOAFees = parseFloat(document.getElementById('estimatedMonthlyHOAFees').value);
var loanTermYears = parseFloat(document.getElementById('loanTermYears').value);
// Validate inputs
if (isNaN(annualGrossIncome) || annualGrossIncome < 0 ||
isNaN(monthlyOtherDebts) || monthlyOtherDebts < 0 ||
isNaN(estimatedMonthlyPropertyTaxes) || estimatedMonthlyPropertyTaxes < 0 ||
isNaN(estimatedMonthlyHomeInsurance) || estimatedMonthlyHomeInsurance < 0 ||
isNaN(estimatedMonthlyHOAFees) || estimatedMonthlyHOAFees < 0 ||
isNaN(loanTermYears) || loanTermYears <= 0) {
document.getElementById('result').innerHTML = 'Please enter valid positive numbers for all fields.';
return;
}
// Hardcoded Assumptions (as per instructions, not user inputs)
var assumedInterestRate = 0.07; // 7% annual interest rate
var assumedDownPaymentPercentage = 0.20; // 20% down payment
var frontEndDTI = 0.28; // 28% housing ratio
var backEndDTI = 0.36; // 36% total debt ratio
// Convert annual income to monthly
var monthlyGrossIncome = annualGrossIncome / 12;
// 1. Calculate maximum monthly housing payment based on Front-End DTI
var maxHousingPaymentFrontEnd = monthlyGrossIncome * frontEndDTI;
// 2. Calculate maximum total monthly debt payment based on Back-End DTI
var maxTotalDebtPaymentBackEnd = monthlyGrossIncome * backEndDTI;
// 3. Calculate maximum monthly housing payment based on Back-End DTI (subtracting other debts)
var maxHousingPaymentBackEnd = maxTotalDebtPaymentBackEnd – monthlyOtherDebts;
// The actual maximum affordable monthly housing payment (PITI + HOA) is the lower of the two DTI calculations
var affordablePITI_HOA = Math.min(maxHousingPaymentFrontEnd, maxHousingPaymentBackEnd);
// Ensure affordablePITI_HOA is not negative
if (affordablePITI_HOA < 0) {
document.getElementById('result').innerHTML = 'Your current debt obligations are too high to afford additional housing costs based on standard DTI ratios.';
return;
}
// Subtract fixed housing costs (taxes, insurance, HOA) to get the maximum Principal & Interest (P&I) payment
var maxPIPayment = affordablePITI_HOA – estimatedMonthlyPropertyTaxes – estimatedMonthlyHomeInsurance – estimatedMonthlyHOAFees;
// Ensure maxPIPayment is not negative
if (maxPIPayment <= 0) {
document.getElementById('result').innerHTML = 'Based on your income and existing debts, your estimated fixed housing costs (taxes, insurance, HOA) already exceed or consume most of your affordable housing budget. You may not be able to afford a mortgage payment.';
return;
}
// Now, work backward from maxPIPayment to find the maximum loan amount
var monthlyRate = assumedInterestRate / 12;
var numPayments = loanTermYears * 12;
// Mortgage Payment Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// To find P (Principal/Loan Amount): P = M * [ (1 + i)^n – 1] / [ i(1 + i)^n ]
// Or, P = M * [ (1 – (1 + i)^-n) / i ]
var maxLoanAmount = maxPIPayment * ((1 – Math.pow(1 + monthlyRate, -numPayments)) / monthlyRate);
// Calculate the maximum affordable house price
// Loan Amount = House Price * (1 – Down Payment Percentage)
// House Price = Loan Amount / (1 – Down Payment Percentage)
var maxHousePrice = maxLoanAmount / (1 – assumedDownPaymentPercentage);
// Format results
var formattedAffordablePITI_HOA = affordablePITI_HOA.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedMaxHousePrice = maxHousePrice.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 2, maximumFractionDigits: 2 });
// Display results
var resultHtml = `
Based on your inputs and standard lending guidelines:
Your Maximum Affordable Monthly Housing Payment (PITI + HOA) is: ${formattedAffordablePITI_HOA}
This includes estimated Principal, Interest, Property Taxes, Home Insurance, and HOA Fees.
With an assumed 20% initial equity contribution and 7% financing rate over ${loanTermYears} years:
Your Maximum Estimated Loan Amount could be: ${formattedMaxLoanAmount}
Your Maximum Estimated House Price could be: ${formattedMaxHousePrice}These estimates are based on common DTI ratios (28%/36%), an assumed 7% annual financing rate, and a 20% initial equity contribution. Actual affordability may vary.
`;
document.getElementById('result').innerHTML = resultHtml;
}