Determining "how much house can I afford" is the critical first step in the home buying journey. This calculator helps you estimate a realistic purchase price based on your income, debts, down payment, and current interest rates.
The 28/36 Rule Explained
Lenders typically use the 28/36 rule to determine how much money they will lend you:
Front-End Ratio (28%): Your monthly housing costs (mortgage principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
Back-End Ratio (36%): Your total monthly debt payments (housing costs plus student loans, car payments, credit cards, etc.) should not exceed 36% of your gross monthly income.
Our calculator checks both ratios and uses the lower amount to ensure you don't overextend your finances.
Key Factors Affecting Affordability
Several variables impact your purchasing power:
Interest Rates: Even a small increase in interest rates can significantly reduce the loan amount you qualify for, as more of your monthly payment goes toward interest.
Down Payment: A larger down payment reduces the loan amount needed, allowing you to buy a more expensive home for the same monthly payment. It also helps avoid Private Mortgage Insurance (PMI) if you put down 20% or more.
Debt-to-Income (DTI): Lowering your existing monthly debts (like paying off a car or credit card) is one of the fastest ways to increase your home buying budget.
Property Taxes & HOA: High taxes or Homeowners Association fees count directly against your monthly buying power, reducing the mortgage amount you can afford.
Tips for Increasing Your Budget
If the calculated home price is lower than expected, consider these strategies: pay down high-interest debt to improve your DTI ratio, save for a larger down payment, or look for areas with lower property taxes. Improving your credit score can also qualify you for lower interest rates, significantly boosting your affordability.
function calculateAffordability() {
// 1. Get Inputs
var annualIncome = parseFloat(document.getElementById('hacAnnualIncome').value);
var monthlyDebt = parseFloat(document.getElementById('hacMonthlyDebt').value);
var downPayment = parseFloat(document.getElementById('hacDownPayment').value);
var interestRate = parseFloat(document.getElementById('hacInterestRate').value);
var loanTermYears = parseInt(document.getElementById('hacLoanTerm').value);
var taxRateAnnual = parseFloat(document.getElementById('hacPropertyTax').value);
var insRateAnnual = parseFloat(document.getElementById('hacHomeInsurance').value);
var hoaFees = parseFloat(document.getElementById('hacHoa').value);
// Default 0 if empty
if (isNaN(annualIncome)) annualIncome = 0;
if (isNaN(monthlyDebt)) monthlyDebt = 0;
if (isNaN(downPayment)) downPayment = 0;
if (isNaN(interestRate)) interestRate = 0;
if (isNaN(taxRateAnnual)) taxRateAnnual = 0;
if (isNaN(insRateAnnual)) insRateAnnual = 0;
if (isNaN(hoaFees)) hoaFees = 0;
// 2. Constants & Conversions
var monthlyIncome = annualIncome / 12;
var r = (interestRate / 100) / 12; // Monthly interest rate
var n = loanTermYears * 12; // Total months
var taxRateMonthly = (taxRateAnnual / 100) / 12;
var insRateMonthly = (insRateAnnual / 100) / 12;
// 3. Calculate Maximum Allowable Monthly Housing Payment
// Rule 1: Front-end ratio (28% of income)
var maxFront = monthlyIncome * 0.28;
// Rule 2: Back-end ratio (36% of income – debts)
var maxBack = (monthlyIncome * 0.36) – monthlyDebt;
// The lender takes the lower of the two
var maxAllowableTotal = Math.min(maxFront, maxBack);
// Determining limiting factor text
var limitText = (maxFront < maxBack) ? "Front-End Ratio (28% of Income)" : "Back-End Ratio (Debt-to-Income)";
if (maxBack 36%)";
}
// Subtract HOA as it's a fixed cost not dependent on loan size
var availableForMortgageAndEscrow = maxAllowableTotal – hoaFees;
if (availableForMortgageAndEscrow <= 0) {
displayZeroResult(limitText);
return;
}
// 4. Calculate Max Home Price
// Formula derivation:
// P = Principal (Loan Amount)
// M_payment = P * (r(1+r)^n / ((1+r)^n – 1)) <– Mortgage Factor (mf)
// T_payment = HomePrice * taxRateMonthly
// I_payment = HomePrice * insRateMonthly
// Total_Avail = (HomePrice – DownPayment)*mf + HomePrice*taxRateMonthly + HomePrice*insRateMonthly
// Total_Avail = HomePrice * (mf + taxRateMonthly + insRateMonthly) – DownPayment * mf
// HomePrice = (Total_Avail + DownPayment * mf) / (mf + taxRateMonthly + insRateMonthly)
var mortgageFactor;
if (r === 0) {
mortgageFactor = 1 / n;
} else {
mortgageFactor = (r * Math.pow(1 + r, n)) / (Math.pow(1 + r, n) – 1);
}
var numerator = availableForMortgageAndEscrow + (downPayment * mortgageFactor);
var denominator = mortgageFactor + taxRateMonthly + insRateMonthly;
var maxHomePrice = numerator / denominator;
// Edge case: if maxHomePrice < downPayment, it implies loan is negative.
// However, if they have cash, they can buy up to downPayment + affordable loan.
// If affordable loan is negative (math quirk), max price is just downpayment?
// Usually standard affordability checks imply getting a loan.
// If denominator is valid, the formula holds.
if (maxHomePrice < 0) maxHomePrice = 0;
// 5. Calculate Breakdown based on Max Home Price
var loanAmount = maxHomePrice – downPayment;
if (loanAmount < 0) loanAmount = 0;
var piPayment = loanAmount * mortgageFactor;
var taxPayment = maxHomePrice * taxRateMonthly;
var insPayment = maxHomePrice * insRateMonthly;
var totalMonthly = piPayment + taxPayment + insPayment + hoaFees;
// 6. Display Results
document.getElementById('hacResult').style.display = 'block';
// Format Currency
var fmt = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD', maximumFractionDigits: 0 });
document.getElementById('hacMaxPrice').innerText = fmt.format(maxHomePrice);
document.getElementById('hacMaxMonthly').innerText = fmt.format(totalMonthly);
document.getElementById('hacPI').innerText = fmt.format(piPayment);
document.getElementById('hacTax').innerText = fmt.format(taxPayment);
document.getElementById('hacIns').innerText = fmt.format(insPayment);
document.getElementById('hacLimitFactor').innerText = limitText;
}
function displayZeroResult(limitText) {
document.getElementById('hacResult').style.display = 'block';
document.getElementById('hacMaxPrice').innerText = "$0";
document.getElementById('hacMaxMonthly').innerText = "$0";
document.getElementById('hacPI').innerText = "$0";
document.getElementById('hacTax').innerText = "$0";
document.getElementById('hacIns').innerText = "$0";
document.getElementById('hacLimitFactor').innerText = limitText;
}