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Home Affordability Calculator

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function calculateHomeAffordability() { 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 = parseFloat(document.getElementById('loanTerm').value); var resultDiv = document.getElementById('affordabilityResult'); if (isNaN(annualIncome) || isNaN(monthlyDebts) || isNaN(downPayment) || isNaN(interestRate) || annualIncome <= 0) { resultDiv.innerHTML = '
Please fill in all fields with valid numbers.
'; return; } var monthlyGrossIncome = annualIncome / 12; var monthlyRate = (interestRate / 100) / 12; var numberOfPayments = loanTermYears * 12; // Using the standard 28/36 rule for conservative affordability // 28% of gross monthly income for housing (P&I, taxes, insurance) // 36% of gross monthly income for all debt var frontEndMax = monthlyGrossIncome * 0.28; var backEndMax = (monthlyGrossIncome * 0.36) – monthlyDebts; // We use the lower of the two to be safe var maxMonthlyPI = Math.min(frontEndMax, backEndMax); if (maxMonthlyPI <= 0) { resultDiv.innerHTML = '
Based on your current debt-to-income ratio, your monthly debts exceed recommended limits for a new mortgage.
'; return; } // Formula: Loan Amount = Pmt * [(1 – (1 + r)^-n) / r] var loanAmount = maxMonthlyPI * ((1 – Math.pow(1 + monthlyRate, -numberOfPayments)) / monthlyRate); var totalHomePrice = loanAmount + downPayment; resultDiv.innerHTML = '
' + '

You can afford a home up to:

' + '
$' + totalHomePrice.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}) + '
' + 'Based on a maximum monthly payment of $' + maxMonthlyPI.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + '' + 'Estimated Loan Amount: $' + loanAmount.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}) + '' + '
'; }

How Much House Can I Afford?

Determining your home buying budget is the most critical first step in the real estate journey. While a bank might pre-approve you for a specific amount, understanding your personal "affordability" involves looking at your income, existing debt, and lifestyle costs. Our home affordability calculator uses the industry-standard 28/36 rule to provide a realistic estimate of your purchasing power.

Understanding the 28/36 Rule

Lenders typically use two primary ratios to determine how much they are willing to lend you:

  • Front-End Ratio (28%): This rule suggests that your total housing costs (principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
  • Back-End Ratio (36%): This rule suggests that your total debt obligations (housing costs plus car loans, student loans, and credit card payments) should not exceed 36% of your gross monthly income.

Key Factors That Influence Your Budget

Several variables impact the final number you see in the calculator:

  1. Debt-to-Income (DTI) Ratio: If you have high monthly student loan or car payments, your "back-end" ratio will be hit first, significantly lowering the amount you can borrow for a home.
  2. Down Payment: A larger down payment directly increases your home price limit without increasing your monthly mortgage payment.
  3. Interest Rates: Even a 1% shift in interest rates can change your purchasing power by tens of thousands of dollars. Higher rates mean higher monthly interest costs, leaving less room for the principal loan amount.

Realistic Affordability Example

Let's look at a typical scenario for a household using this calculator:

Scenario: The Miller Family
  • Annual Income: $100,000
  • Monthly Debt: $400 (Car loan)
  • Down Payment: $50,000
  • Interest Rate: 6.0%

Based on the 36% rule, their maximum total debt is $3,000/month. After subtracting their $400 car loan, they have $2,600 available for a mortgage payment. However, the 28% rule limits their housing payment to $2,333. Using the lower figure ($2,333) at a 6% interest rate over 30 years, they could afford a home priced at approximately $439,000.

Don't Forget Closing Costs

When using this calculator, remember that your down payment cash shouldn't represent every penny in your bank account. You should typically set aside an additional 2% to 5% of the home's purchase price for closing costs, which include loan origination fees, title insurance, and appraisals.

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