Pay Rate Calculator with Taxes

Home Affordability Calculator

Estimate how much house you can realistically afford based on your income and debts.

30 Years 15 Years 20 Years

Maximum Home Price

$0

Monthly P&I: $0

Estimated Monthly Total: $0

DTI Ratio: 36%

*Calculations assume a Debt-to-Income ratio of 36% for conservative planning.

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 high amount, understanding the "comfort zone" for your monthly payments ensures you don't become "house poor."

The 28/36 Rule Explained

Financial advisors and lenders often use the 28/36 rule to determine affordability:

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

Key Factors Impacting Your Budget

Several variables influence your final purchasing power beyond just your salary:

1. Interest Rates: Even a 1% shift in rates can change your buying power by tens of thousands of dollars. Higher rates mean higher monthly interest payments and a lower maximum loan amount.
2. Down Payment: A larger down payment reduces the amount you need to borrow and may eliminate the need for Private Mortgage Insurance (PMI).
3. Debt-to-Income (DTI) Ratio: Lenders look at how much of your income is already spoken for by other creditors. High student loan or car payments will directly reduce the mortgage amount you qualify for.
4. Property Taxes and Insurance: These vary wildly by location. A $400,000 home in Texas might have a much higher monthly cost than a $400,000 home in Arizona due to property tax rates.

A Realistic Example

Let's look at a family earning $100,000 per year with $500 in monthly debt and $50,000 saved for a down payment:

• Gross Monthly Income: $8,333
• Allowable Total Debt (36%): $3,000
• Available for Housing: $2,500 (Total debt minus $500 existing debt)
• Estimated Budget: At a 6.5% interest rate, this family could likely afford a home priced around $440,000.

Tips for Increasing Your Affordability

If the calculator shows a lower number than you hoped for, consider these strategies:

• Improve your credit score: A higher score unlocks lower interest rates.
• Pay down existing debt: Reducing your car loan or credit card balances improves your DTI ratio immediately.
• Save for a larger down payment: This lowers your loan-to-value ratio and monthly P&I.

function calculateAffordability() { // Inputs 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 loanTermYears = parseInt(document.getElementById('loanTerm').value); if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate)) { alert("Please enter valid numerical values."); return; } // Calculations based on 36% DTI Rule var monthlyGrossIncome = annualIncome / 12; var maxMonthlyDebtAllowed = monthlyGrossIncome * 0.36; // Amount available for Mortgage (P&I + Taxes + Insurance) var availableForHousingTotal = maxMonthlyDebtAllowed – monthlyDebt; // Estimate 1.2% property tax and 0.35% insurance annually based on home price // Since these depend on home price, we approximate housing P&I as 75% of the housing total // to account for taxes/insurance (TI). var availableForPI = availableForHousingTotal * 0.75; if (availableForPI <= 0) { document.getElementById('maxHomePrice').innerHTML = "Check Debt"; document.getElementById('monthlyPI').innerHTML = "$0"; document.getElementById('monthlyTotal').innerHTML = "$0"; return; } // Mortgage Formula: P = L[c(1 + c)^n] / [(1 + c)^n – 1] // We need to find L (Loan Amount): L = P * [((1 + c)^n) – 1] / [c(1 + c)^n] var monthlyRate = (interestRate / 100) / 12; var numberOfPayments = loanTermYears * 12; var loanAmount = availableForPI * (Math.pow(1 + monthlyRate, numberOfPayments) – 1) / (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)); var maxHomePrice = loanAmount + downPayment; // Formatting Results var formatter = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD', maximumFractionDigits: 0 }); document.getElementById('maxHomePrice').innerHTML = formatter.format(maxHomePrice); document.getElementById('monthlyPI').innerHTML = formatter.format(availableForPI); document.getElementById('monthlyTotal').innerHTML = formatter.format(availableForHousingTotal); } // Run once on load window.onload = calculateAffordability;