Determining "how much house can I afford" is the first critical step in the home buying process. This calculator helps you estimate your purchasing power based on your income, existing debts, and current mortgage interest rates. Unlike simple loan estimators, affordability is determined by your Debt-to-Income (DTI) ratio—a key metric lenders use to approve mortgages.
Key Factors Affecting Your Affordability
Debt-to-Income Ratio (DTI): This represents the percentage of your gross monthly income that goes toward paying debts. Most lenders prefer a "back-end" DTI (housing + other debts) of no more than 36% to 43%.
Down Payment: A larger down payment reduces the loan amount needed, lowering your monthly payments and potentially allowing you to afford a more expensive home.
Interest Rates: Even a small difference in interest rates can significantly impact your monthly purchasing power. Higher rates increase monthly payments, reducing the total loan amount you qualify for.
Property Taxes & Insurance: These recurring costs are included in your monthly mortgage obligations (PITI). High taxes in certain areas can reduce the loan amount you can afford.
The 28/36 Rule
Financial experts often cite the 28/36 rule as a benchmark for home affordability. This rule suggests that:
No more than 28% of your gross monthly income should go toward housing expenses (mortgage principal, interest, taxes, and insurance).
No more than 36% of your gross monthly income should go toward total debt (housing expenses + car loans, student loans, credit cards, etc.).
Our calculator allows you to adjust the DTI limit, as FHA loans and some conventional lenders may allow ratios up to 43% or even higher in specific circumstances.
Tips to Increase Affordability
If the calculated home price is lower than expected, consider paying down high-interest credit card debt to improve your DTI ratio, saving for a larger down payment to avoid Private Mortgage Insurance (PMI), or looking for properties in areas with lower property taxes.
function calculateAffordability() {
// 1. Get Inputs
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 dtiRatio = parseFloat(document.getElementById('dtiRatio').value);
var propertyTaxYearly = parseFloat(document.getElementById('propertyTax').value);
var homeInsuranceYearly = parseFloat(document.getElementById('homeInsurance').value);
// Validation
if (isNaN(annualIncome) || isNaN(interestRate) || isNaN(loanTermYears) || isNaN(dtiRatio)) {
alert("Please enter valid numbers for Income, Interest Rate, and DTI.");
return;
}
// Handle defaults for empty fields
if (isNaN(monthlyDebts)) monthlyDebts = 0;
if (isNaN(downPayment)) downPayment = 0;
if (isNaN(propertyTaxYearly)) propertyTaxYearly = 0;
if (isNaN(homeInsuranceYearly)) homeInsuranceYearly = 0;
// 2. Calculations
var monthlyGrossIncome = annualIncome / 12;
// Calculate Max Allowable Total Debt Payment based on DTI
var maxTotalMonthlyDebt = monthlyGrossIncome * (dtiRatio / 100);
// Calculate Max Allowable Housing Payment (PITI)
// Max Housing = Max Total Debt – Other Monthly Debts
var maxHousingPayment = maxTotalMonthlyDebt – monthlyDebts;
// Calculate Monthly Tax and Insurance
var monthlyTax = propertyTaxYearly / 12;
var monthlyInsurance = homeInsuranceYearly / 12;
var monthlyEscrow = monthlyTax + monthlyInsurance;
// Calculate Max Principal and Interest (P&I) Payment
var maxPrincipalAndInterest = maxHousingPayment – monthlyEscrow;
var resultBox = document.getElementById('resultBox');
var maxHomePriceEl = document.getElementById('maxHomePrice');
var breakdownEl = document.getElementById('breakdownOutput');
resultBox.style.display = 'block';
// Check if debts are too high
if (maxPrincipalAndInterest <= 0) {
maxHomePriceEl.innerHTML = "$0";
maxHomePriceEl.style.color = "#c0392b";
breakdownEl.innerHTML = "Affordability Issue: Your current monthly debts combined with estimated taxes and insurance exceed the allowed debt-to-income ratio. You cannot qualify for a mortgage principal payment under these settings.";
return;
}
maxHomePriceEl.style.color = "#2c3e50";
// Calculate Loan Amount based on Max P&I
// Formula: P = M * ( (1 – (1+r)^-n) / r )
var r = interestRate / 100 / 12;
var n = loanTermYears * 12;
var maxLoanAmount = 0;
if (interestRate === 0) {
maxLoanAmount = maxPrincipalAndInterest * n;
} else {
maxLoanAmount = maxPrincipalAndInterest * ( (1 – Math.pow(1 + r, -n)) / r );
}
// Max Home Price = Loan Amount + Down Payment
var maxHomePrice = maxLoanAmount + downPayment;
// Formatting currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
// 3. Display Results
maxHomePriceEl.innerHTML = formatter.format(maxHomePrice);
breakdownEl.innerHTML =
"Based on a " + dtiRatio + "% DTI ratio, your maximum allowable monthly housing payment is " + formatter.format(maxHousingPayment) + "." +
"Monthly Breakdown:" +
"• Principal & Interest: " + formatter.format(maxPrincipalAndInterest) + "" +
"• Taxes & Insurance: " + formatter.format(monthlyEscrow) + "" +
"• Other Debts: " + formatter.format(monthlyDebts) + "" +
"Loan Details:" +
"• Max Loan Amount: " + formatter.format(maxLoanAmount) + "" +
"• Down Payment: " + formatter.format(downPayment) + "";
}