Mortgage Cost Calculator

Home Affordability Calculator

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Estimated Home Budget

$0

Monthly P&I

$0

Total Monthly Payment

$0

Debt-to-Income

0%

function calculateAffordability() { var annualIncome = parseFloat(document.getElementById('annualIncome').value) || 0; var downPayment = parseFloat(document.getElementById('downPayment').value) || 0; var monthlyDebt = parseFloat(document.getElementById('monthlyDebt').value) || 0; var interestRate = parseFloat(document.getElementById('interestRate').value) / 100 / 12; var loanTermMonths = parseFloat(document.getElementById('loanTerm').value) * 12; var annualTax = parseFloat(document.getElementById('propertyTax').value) || 0; var annualInsurance = annualIncome * 0.01; // Rough estimate 1% of income for insurance var monthlyIncome = annualIncome / 12; var monthlyTaxInsurance = (annualTax + annualInsurance) / 12; // Using the 36% DTI Rule (Total debt should not exceed 36% of gross income) var maxTotalMonthlyDebtAllowed = monthlyIncome * 0.36; var maxMonthlyMortgagePayment = maxTotalMonthlyDebtAllowed – monthlyDebt; // Subtract taxes and insurance from the allowable monthly payment to find available P&I var availablePI = maxMonthlyMortgagePayment – monthlyTaxInsurance; if (availablePI <= 0) { alert("Based on your debt and income, the monthly taxes and existing debt exceed the recommended 36% DTI ratio. Consider reducing debt or increasing income."); return; } // Loan Amount Formula: L = P * [ (1+c)^n – 1 ] / [ c(1+c)^n ] var loanAmount = availablePI * (Math.pow(1 + interestRate, loanTermMonths) – 1) / (interestRate * Math.pow(1 + interestRate, loanTermMonths)); var totalHomePrice = loanAmount + downPayment; var dti = ((maxMonthlyMortgagePayment + monthlyDebt) / monthlyIncome) * 100; document.getElementById('totalPrice').innerText = "$" + Math.round(totalHomePrice).toLocaleString(); document.getElementById('monthlyPI').innerText = "$" + Math.round(availablePI).toLocaleString(); document.getElementById('totalMonthly').innerText = "$" + Math.round(maxMonthlyMortgagePayment).toLocaleString(); document.getElementById('dtiRatio').innerText = Math.round(dti) + "%"; document.getElementById('resultsArea').style.display = 'block'; }

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How Much House Can I Afford?

Determining your home buying budget is the most critical step in the real estate journey. While a bank might pre-approve you for a certain amount, understanding your "true" affordability involves looking at your gross income, existing monthly debts, and the cash you have available for a down payment.

The 28/36 Rule Explained

Lenders typically use the 28/36 rule to assess your creditworthiness:

• Front-End Ratio (28%): Your total housing expenses (mortgage, taxes, insurance) should not exceed 28% of your gross monthly income.
• Back-End Ratio (36%): Your total debt obligations (housing plus car loans, student loans, and credit cards) should not exceed 36% of your gross monthly income.

Our calculator uses a balanced approach, primarily focusing on the 36% back-end ratio to ensure you aren't "house poor" after moving in.

Key Factors Impacting Affordability

1. Interest Rates: Even a 1% shift in interest rates can change your purchasing power by tens of thousands of dollars.
2. Debt-to-Income (DTI) Ratio: High car payments or student loans reduce the amount a bank is willing to lend you for a home.
3. Property Taxes & Insurance: These are "hidden" costs of homeownership. In high-tax states, a $300,000 home might cost the same per month as a $400,000 home in a low-tax state.
4. Down Payment: A larger down payment reduces your loan amount and may eliminate the need for Private Mortgage Insurance (PMI).

Real-World Example

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

Household Income: $100,000/year ($8,333/month)

Monthly Debts: $500 (Car + Credit Cards)

Down Payment: $50,000

Interest Rate: 6.5%

Result: This household could likely afford a home priced around $395,000. Their total monthly mortgage payment (including taxes and insurance) would be approximately $2,500, keeping their total DTI ratio at a healthy 36%.

Tips to Increase Your Budget

If the result from the calculator is lower than you hoped, consider these strategies:

• Pay down high-interest debt: Eliminating a $400 car payment can increase your home buying power by roughly $60,000.
• Improve your credit score: A higher score secures a lower interest rate, which directly lowers your monthly payment.
• Shop for insurance: Getting multiple quotes for homeowners insurance can save you hundreds per year, slightly increasing your loan eligibility.