*Calculations exclude HOA fees and PMI. Actual qualification depends on lender criteria and credit score.
function calculateHouseAffordability() {
// 1. Get Input Values
var income = parseFloat(document.getElementById('hac_annual_income').value);
var debts = parseFloat(document.getElementById('hac_monthly_debts').value);
var downPayment = parseFloat(document.getElementById('hac_down_payment').value);
var rate = parseFloat(document.getElementById('hac_interest_rate').value);
var termYears = parseInt(document.getElementById('hac_loan_term').value);
var taxRate = parseFloat(document.getElementById('hac_property_tax').value);
var insurance = parseFloat(document.getElementById('hac_insurance').value);
var strategy = document.getElementById('hac_dti_limit').value;
// 2. Validate Inputs
if (isNaN(income) || isNaN(debts) || isNaN(downPayment) || isNaN(rate) || isNaN(termYears) || isNaN(taxRate) || isNaN(insurance)) {
alert("Please fill in all fields with valid numbers.");
return;
}
// 3. Determine DTI Limits based on strategy
// Front-end: Housing costs / Gross Income
// Back-end: (Housing costs + Debts) / Gross Income
var frontEndRatio = 0.28;
var backEndRatio = 0.36;
if (strategy === "aggressive") {
frontEndRatio = 0.36;
backEndRatio = 0.43;
}
// 4. Calculate Max Monthly Payment Capacities
var monthlyIncome = income / 12;
// Cap based on front-end (Housing only)
var maxPaymentFront = monthlyIncome * frontEndRatio;
// Cap based on back-end (Housing + Debts)
var maxPaymentBack = (monthlyIncome * backEndRatio) – debts;
// The allowable monthly payment is the lesser of the two
var maxAllowablePayment = Math.min(maxPaymentFront, maxPaymentBack);
if (maxAllowablePayment <= 0) {
document.getElementById('hac_results_area').style.display = 'block';
document.getElementById('hac_result_home_price').innerText = "$0";
document.getElementById('hac_result_loan_amount').innerText = "$0";
document.getElementById('hac_result_pi').innerText = "$0";
document.getElementById('hac_result_ti').innerText = "$0";
document.getElementById('hac_result_total_monthly').innerText = "$0";
return;
}
// 5. Reverse Calculate Home Price from Max Monthly Payment
// Formula: MaxPayment = (PrincipalAndInterest) + (MonthlyTax) + (MonthlyInsurance)
// P&I = (HomePrice – Down) * MFactor
// Tax = HomePrice * (TaxRate / 100 / 12)
// Insurance = Insurance / 12
// var P = Home Price
// var D = Down Payment
// var MFactor = Mortgage Constant
// var TFactor = Tax Rate per month
// var IM = Monthly Insurance Cost
// var MaxP = MaxAllowablePayment
// MaxP = (P – D)*MFactor + P*TFactor + IM
// MaxP – IM = P*MFactor – D*MFactor + P*TFactor
// MaxP – IM + D*MFactor = P(MFactor + TFactor)
// P = (MaxP – IM + D*MFactor) / (MFactor + TFactor)
var r = rate / 100 / 12;
var n = termYears * 12;
var mFactor = 0;
if (rate === 0) {
mFactor = 1 / n;
} else {
mFactor = (r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1);
}
var tFactor = taxRate / 100 / 12;
var monthlyInsurance = insurance / 12;
var numerator = maxAllowablePayment – monthlyInsurance + (downPayment * mFactor);
var denominator = mFactor + tFactor;
var maxHomePrice = numerator / denominator;
// Ensure Home Price isn't less than down payment (edge case)
if (maxHomePrice < downPayment) {
maxHomePrice = downPayment; // User can only afford what they have in cash
}
// 6. Calculate breakdown values based on derived Home Price
var loanAmount = maxHomePrice – downPayment;
if (loanAmount < 0) loanAmount = 0;
var monthlyPI = loanAmount * mFactor;
var monthlyTax = maxHomePrice * tFactor;
var totalMonthly = monthlyPI + monthlyTax + monthlyInsurance;
// 7. Format and Display Results
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('hac_result_home_price').innerText = formatter.format(maxHomePrice);
document.getElementById('hac_result_loan_amount').innerText = formatter.format(loanAmount);
document.getElementById('hac_result_pi').innerText = formatter.format(monthlyPI);
document.getElementById('hac_result_ti').innerText = formatter.format(monthlyTax + monthlyInsurance);
document.getElementById('hac_result_total_monthly').innerText = formatter.format(totalMonthly);
document.getElementById('hac_results_area').style.display = 'block';
}
How Much House Can You Afford? A Comprehensive Guide
Determining your home affordability is the critical first step in the home buying process. Before looking at listings or attending open houses, understanding your financial ceiling ensures you search for properties that fit your budget without compromising your financial stability. This Home Affordability Calculator uses standard lender debt-to-income (DTI) ratios to estimate a realistic purchase price.
Understanding the 28/36 Rule
Lenders typically use the 28/36 rule to determine how much money they will lend you. This rule consists of two separate ratios:
Front-End Ratio (28%): No more than 28% of your gross monthly income should go toward housing costs. This includes your mortgage principal, interest, property taxes, and homeowners insurance (often abbreviated as PITI).
Back-End Ratio (36%): No more than 36% of your gross monthly income should go toward total debt payments. This includes your housing costs plus credit card payments, student loans, car loans, and any other recurring debt.
Our calculator checks both of these limits. If you have significant monthly debts (like a high car payment), your affordability will be capped by the back-end ratio, reducing the home price you can afford even if your income is high.
Key Factors Affecting Affordability
Several variables impact your purchasing power beyond just your salary:
1. Interest Rates
Interest rates have a massive impact on affordability. As rates rise, the cost of borrowing increases, which increases your monthly payment for the same loan amount. Consequently, higher rates reduce your maximum home price. For example, a 1% increase in interest rate can reduce your buying power by approximately 10-11%.
2. Down Payment
A larger down payment increases your affordability in two ways: it reduces the loan amount required (lowering monthly payments) and provides immediate equity. If your calculated affordability is lower than local home prices, saving for a larger down payment is one of the most effective ways to bridge the gap.
3. Property Taxes and Insurance
Many buyers focus solely on the mortgage payment, forgetting that property taxes and insurance are perpetual costs. In high-tax areas, a significant portion of your monthly payment goes to taxes, which directly reduces the amount of mortgage loan you can carry.
How to Improve Your Affordability
If the results from the calculator are lower than you hoped, consider these strategies:
Pay down existing debt: reducing monthly obligations lowers your back-end DTI ratio.
Improve your credit score: A better score can qualify you for lower interest rates.
Extend the loan term: A 30-year term has lower monthly payments than a 15-year term, though you will pay more interest over time.
Save for a larger down payment: This reduces the principal you need to borrow.