Lenders often use a DTI of 36% to 43%. This is the percentage of your gross monthly income that goes towards debt payments.
Taxes vary by location and home value.
Covers damage and liability for your home.
Homeowners Association fees for managed communities.
Current market rates for mortgages.
Typically 15 or 30 years.
Your Estimated Maximum House Price:
$0
Understanding Your House Affordability: How Much House Can You Afford?
Determining how much house you can afford is a crucial step in the home-buying process. It's not just about what a lender *will* give you, but what you can comfortably *afford* based on your income, expenses, and financial goals. This calculator helps estimate your maximum affordable house price by considering key financial factors.
The Math Behind the Calculation
The core of this calculation revolves around the Debt-to-Income (DTI) ratio, a metric lenders use to assess your ability to manage monthly payments and repay debts. A common guideline is that your total monthly debt payments, including your potential mortgage, should not exceed a certain percentage of your gross monthly income (your income before taxes).
Here's a breakdown of the steps our calculator uses:
Calculate Gross Monthly Income: Your Annual Gross Salary is divided by 12.
Determine Maximum Allowable Monthly Debt: This is calculated by multiplying your Gross Monthly Income by your target Debt-to-Income Ratio (DTI). This figure represents the maximum total monthly debt payments you can handle.
Calculate Monthly Costs of Homeownership (Excluding Mortgage Principal & Interest): We sum up the estimated monthly costs that are *not* part of your principal and interest mortgage payment:
Estimated Annual Property Taxes / 12
Estimated Annual Homeowners Insurance / 12
Estimated Annual HOA Fees / 12
Private Mortgage Insurance (PMI): While not explicitly a user input, it's important to note that if your down payment is less than 20%, you will likely have PMI. This calculator provides a maximum potential price and doesn't factor in PMI, which would reduce your affordable loan amount.
Calculate Maximum Monthly Mortgage Payment (Principal & Interest – P&I): Subtract the Monthly Costs of Homeownership (from step 3) from the Maximum Allowable Monthly Debt (from step 2). This gives you the maximum amount you can afford to spend on just the principal and interest of your mortgage each month.
Estimate Maximum Loan Amount: Using the Maximum Monthly Mortgage Payment (P&I), the Estimated Mortgage Interest Rate, and the Mortgage Loan Term (Years), we calculate the maximum loan amount you can afford using the standard mortgage payment formula (solved for loan amount). The formula for the monthly payment (M) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] Where:
n = Total number of payments (Loan Term Years * 12)
Rearranging to solve for P gives:
P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
Estimate Maximum House Price: The final Maximum House Price is the calculated Maximum Loan Amount plus an assumed Down Payment. For simplicity in this calculator, we're estimating the maximum loan amount based on the inputs, and implying that the maximum house price would be this loan amount plus whatever down payment you can reasonably make. *Note: A more sophisticated calculator might ask for a down payment percentage.*
Important Considerations:
Down Payment: This calculator primarily focuses on the loan amount you can afford. Your actual house price will depend on your down payment. A larger down payment reduces your loan amount and, consequently, your monthly mortgage payment.
Closing Costs: Remember to budget for closing costs, which can be 2% to 5% of the loan amount.
Home Maintenance: Factor in ongoing costs for repairs and maintenance, typically 1% of the home's value annually.
Personal Budget: This calculator provides an estimate. Always create a detailed personal budget to ensure the monthly housing costs fit comfortably within your overall financial picture.
Lender Requirements: While DTI is a key factor, lenders also consider credit score, employment history, assets, and other factors.
Use this calculator as a guide to understand your potential buying power. It's recommended to speak with a mortgage professional for a pre-approval and a more accurate assessment of your borrowing capacity.
function calculateHouseAffordability() {
var annualSalary = parseFloat(document.getElementById("annualSalary").value);
var debtToIncomeRatio = parseFloat(document.getElementById("debtToIncomeRatio").value);
var estimatedAnnualPropertyTaxes = parseFloat(document.getElementById("estimatedAnnualPropertyTaxes").value);
var estimatedAnnualHomeInsurance = parseFloat(document.getElementById("estimatedAnnualHomeInsurance").value);
var estimatedAnnualHOA = parseFloat(document.getElementById("estimatedAnnualHOA").value);
var estimatedInterestRate = parseFloat(document.getElementById("estimatedInterestRate").value);
var loanTermYears = parseInt(document.getElementById("loanTermYears").value);
var maxHousePrice = 0;
if (isNaN(annualSalary) || annualSalary <= 0 ||
isNaN(debtToIncomeRatio) || debtToIncomeRatio <= 0 ||
isNaN(estimatedAnnualPropertyTaxes) ||
isNaN(estimatedAnnualHomeInsurance) ||
isNaN(estimatedAnnualHOA) ||
isNaN(estimatedInterestRate) || estimatedInterestRate < 0 ||
isNaN(loanTermYears) || loanTermYears <= 0) {
alert("Please enter valid numbers for all fields.");
document.getElementById("maxHousePrice").innerText = "$0";
return;
}
var grossMonthlyIncome = annualSalary / 12;
var maxAllowableMonthlyDebt = grossMonthlyIncome * debtToIncomeRatio;
var monthlyPropertyTaxes = estimatedAnnualPropertyTaxes / 12;
var monthlyHomeInsurance = estimatedAnnualHomeInsurance / 12;
var monthlyHOA = estimatedAnnualHOA / 12;
var otherMonthlyHousingCosts = monthlyPropertyTaxes + monthlyHomeInsurance + monthlyHOA;
var maxMonthlyMortgagePayment = maxAllowableMonthlyDebt – otherMonthlyHousingCosts;
// Ensure maxMonthlyMortgagePayment is not negative
if (maxMonthlyMortgagePayment 0 && numberOfPayments > 0) {
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
if (denominator > 0) {
maxLoanAmount = maxMonthlyMortgagePayment * (numerator / denominator);
}
} else if (maxMonthlyMortgagePayment > 0) {
// Handle case for 0% interest rate (though unlikely for mortgages) or 0 years.
// In practice, a 0% rate for a mortgage is very rare and term would be >0.
// If interest rate is 0, then payment is P/n, so P = M*n.
if (monthlyInterestRate === 0 && numberOfPayments > 0) {
maxLoanAmount = maxMonthlyMortgagePayment * numberOfPayments;
}
}
// The result is the maximum loan amount. This implicitly assumes a 0% down payment for simplicity,
// or rather, it calculates the maximum loan principal that can be supported.
// The actual house price would be this loan amount + down payment.
// For simplicity, we'll display the max loan amount as the estimated maximum house price,
// with the understanding that a down payment would be needed to reach this price.
maxHousePrice = maxLoanAmount;
document.getElementById("maxHousePrice").innerText = "$" + maxHousePrice.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}