Determine how much house you can realistically afford based on your financial profile.
Recommended Home Purchase Price:
Estimated Monthly Payment (P&I):
Maximum Monthly Budget (PITI):
Understanding Home Affordability
Purchasing a home is likely the largest financial commitment you will ever make. Knowing your "buying power" before you start browsing listings is critical to maintaining long-term financial health. This calculator uses the Debt-to-Income (DTI) ratio, a standard metric used by lenders to evaluate your ability to manage monthly payments.
The 28/36 Rule
Most financial experts and lenders suggest the 28/36 rule:
28% Limit: Your total monthly housing costs (principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
36% Limit: Your total debt obligations (including your new mortgage plus car loans, student loans, and credit card payments) should not exceed 36% of your gross monthly income.
Realistic Example:
If you earn $90,000 per year, your gross monthly income is $7,500.
Applying the 36% rule, your total monthly debt (including mortgage) should be no more than $2,700.
If you already pay $500 for a car loan, your maximum available mortgage payment (PITI) is $2,200.
Factors That Influence Your Buying Power
Several variables change the final "sticker price" you can afford:
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, which lowers the principal you can borrow.
Down Payment: The more cash you bring to the table, the lower your loan amount. A 20% down payment also helps you avoid Private Mortgage Insurance (PMI), further increasing your affordability.
Property Taxes and Insurance: These vary wildly by location. A home in a high-tax state will effectively cost you more per month than the same priced home in a low-tax area.
How to Improve Your Affordability
If the results from the calculator are lower than you hoped, consider these steps:
Reduce Existing Debt: Paying off a car or credit card frees up "DTI room" for a larger mortgage payment.
Improve Your Credit Score: A higher score qualifies you for lower interest rates, directly increasing your loan capacity.
Save a Larger Down Payment: This reduces the total loan and interest paid over the life of the mortgage.
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById('annualIncome').value);
var monthlyDebt = parseFloat(document.getElementById('monthlyDebt').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseFloat(document.getElementById('loanTerm').value);
var taxRate = parseFloat(document.getElementById('propertyTax').value);
if (isNaN(annualIncome) || annualIncome <= 0) {
alert("Please enter a valid annual income.");
return;
}
// Monthly Gross Income
var monthlyGross = annualIncome / 12;
// Standard DTI calculation (Conservative 36% rule)
var maxTotalDebtPayment = monthlyGross * 0.36;
var maxMonthlyPITI = maxTotalDebtPayment – monthlyDebt;
// Estimate Insurance and Misc (approx $150/month for average home)
var estimatedInsurance = 150;
// Monthly Budget for Principal, Interest, and Tax
var availableForPIT = maxMonthlyPITI – estimatedInsurance;
if (availableForPIT <= 0) {
document.getElementById('result-box').style.display = 'block';
document.getElementById('maxHomePrice').innerHTML = "Ineligible";
document.getElementById('monthlyPI').innerHTML = "N/A";
document.getElementById('maxMonthlyBudget').innerHTML = "Income too low for current debt";
return;
}
// Math to solve for Loan Amount (L)
// MonthlyPayment = [L * r(1+r)^n / ((1+r)^n – 1)] + [ (L + Down)*TaxRate/12 ]
// var MonthlyPIFactor = r(1+r)^n / ((1+r)^n – 1)
// var MonthlyTaxFactor = TaxRate / 100 / 12
// availableForPIT = L * MonthlyPIFactor + (L + Down) * MonthlyTaxFactor
// availableForPIT – (Down * MonthlyTaxFactor) = L * (MonthlyPIFactor + MonthlyTaxFactor)
var r = (interestRate / 100) / 12;
var n = loanTerm * 12;
var monthlyTaxFactor = (taxRate / 100) / 12;
var monthlyPIFactor;
if (r === 0) {
monthlyPIFactor = 1 / n;
} else {
monthlyPIFactor = (r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1);
}
var loanAmount = (availableForPIT – (downPayment * monthlyTaxFactor)) / (monthlyPIFactor + monthlyTaxFactor);
if (loanAmount < 0) loanAmount = 0;
var maxHomePrice = loanAmount + downPayment;
var monthlyPI = loanAmount * monthlyPIFactor;
// Format for display
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
maximumFractionDigits: 0
});
document.getElementById('result-box').style.display = 'block';
document.getElementById('maxHomePrice').innerHTML = formatter.format(maxHomePrice);
document.getElementById('monthlyPI').innerHTML = formatter.format(monthlyPI) + " /mo";
document.getElementById('maxMonthlyBudget').innerHTML = formatter.format(maxMonthlyPITI) + " /mo";
// Scroll to result
document.getElementById('result-box').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}