function calculateHomeAffordability() {
var annualIncome = parseFloat(document.getElementById('annualIncome').value) || 0;
var monthlyDebts = parseFloat(document.getElementById('monthlyDebts').value) || 0;
var downPayment = parseFloat(document.getElementById('downPayment').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) / 100 || 0;
var loanTerm = parseFloat(document.getElementById('loanTerm').value) || 0;
var taxRate = (parseFloat(document.getElementById('propertyTaxRate').value) / 100) / 12 || 0;
var insuranceEstimate = 100; // Average monthly homeowners insurance
// Standard Debt-to-Income (DTI) ratio used by lenders is 36%
var monthlyGrossIncome = annualIncome / 12;
var maxAllowableMonthlyDebt = monthlyGrossIncome * 0.36;
// Available for monthly housing payment (PITI: Principal, Interest, Taxes, Insurance)
var maxMonthlyHousingPayment = maxAllowableMonthlyDebt – monthlyDebts;
if (maxMonthlyHousingPayment <= 0) {
alert("Your current debts are too high relative to your income for a standard mortgage calculation.");
return;
}
// Estimating the portion available for Principal and Interest
// We subtract insurance and property tax estimation from the total
// PITI = P&I + Taxes + Insurance
// P&I = PITI – Insurance – (Price * TaxRate)
// This requires an algebraic solve since Tax depends on Price
var monthlyRate = interestRate / 12;
var numberOfPayments = loanTerm * 12;
// Formula for Monthly Payment (M) = L * [i(1+i)^n] / [(1+i)^n – 1]
// var Factor (F) = [i(1+i)^n] / [(1+i)^n – 1]
// Monthly Payment (M) = MaxMonthly – Insurance – (TotalHomePrice * TaxRate)
// TotalHomePrice = LoanAmount (L) + DownPayment (D)
// L * F = MaxMonthly – Insurance – ((L + D) * TaxRate)
// L * F = MaxMonthly – Insurance – L*TaxRate – D*TaxRate
// L * F + L*TaxRate = MaxMonthly – Insurance – D*TaxRate
// L(F + TaxRate) = MaxMonthly – Insurance – D*TaxRate
// L = (MaxMonthly – Insurance – D*TaxRate) / (F + TaxRate)
var factor = (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
var loanAmount = (maxMonthlyHousingPayment – insuranceEstimate – (downPayment * taxRate)) / (factor + taxRate);
if (loanAmount <= 0) {
alert("The estimated costs (taxes/insurance) exceed your target monthly budget. Consider a higher income or lower debts.");
return;
}
var totalHomePrice = loanAmount + downPayment;
var monthlyPI = loanAmount * factor;
var monthlyTax = totalHomePrice * taxRate;
var totalMonthlyPayment = monthlyPI + monthlyTax + insuranceEstimate;
// Update UI
document.getElementById('maxHomePrice').innerText = '$' + Math.round(totalHomePrice).toLocaleString();
document.getElementById('monthlyPI').innerText = '$' + Math.round(monthlyPI).toLocaleString();
document.getElementById('totalMonthly').innerText = '$' + Math.round(totalMonthlyPayment).toLocaleString();
document.getElementById('resultsArea').style.display = 'block';
}
How Much House Can I Afford?
Determining your home buying budget is the most critical step in the real estate process. Lenders don't just look at your salary; they look at your Debt-to-Income (DTI) ratio. This calculator uses the "36% Rule," which suggests that your total monthly debt payments (including your new mortgage) should not exceed 36% of your gross monthly income.
Key Factors in Home Affordability
Gross Annual Income: Your total income before taxes. Lenders use this as the baseline for your borrowing capacity.
Monthly Debts: This includes car loans, student loans, and minimum credit card payments. Higher debt reduces the amount you can borrow for a home.
The Down Payment: A larger down payment reduces your loan-to-value ratio, which can help you avoid Private Mortgage Insurance (PMI) and lower your monthly interest costs.
Interest Rates: Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars.
The 28/36 Rule Explained
Most financial advisors recommend following the 28/36 rule:
The 28% Rule: Your mortgage payment (including taxes and insurance) should not exceed 28% of your monthly gross income.
The 36% Rule: Your total debt payments (mortgage + other debts) should not exceed 36% of your monthly gross income.
Our calculator focuses on the 36% rule to give you a comprehensive view of your financial health while taking existing liabilities into account.
Affordability Example
If a household earns $100,000 per year with $500 in monthly debts and a $50,000 down payment:
Monthly Gross Income: $8,333
Max Total Debt (36%): $3,000
Available for Mortgage: $2,500 ($3,000 – $500 debt)
Approximate Buying Power: ~$380,000 – $420,000 (depending on current rates and taxes)
Note: This calculator provides an estimate for informational purposes. Consult with a professional mortgage lender for a formal pre-approval.