Savings Account Interest Rate Calculator

Home Affordability Calculator

Estimated Home Budget

$0

Max Monthly P&I: $0

Total Monthly Payment: $0

Loan Amount: $0

Debt-to-Income: 36%

function calculateAffordability() { var annualIncome = parseFloat(document.getElementById("annualIncome").value); var monthlyDebts = parseFloat(document.getElementById("monthlyDebts").value) || 0; var downPayment = parseFloat(document.getElementById("downPayment").value) || 0; var annualInterest = parseFloat(document.getElementById("interestRate").value) / 100; var loanTermYears = parseInt(document.getElementById("loanTerm").value); var annualTax = parseFloat(document.getElementById("propertyTax").value) || 0; var annualInsurance = annualIncome * 0.01; // Estimate: 1% of income or a flat rate if (!annualIncome || annualIncome <= 0 || !annualInterest) { alert("Please enter valid income and interest rate values."); return; } var monthlyGrossIncome = annualIncome / 12; var monthlyTaxInsurance = (annualTax / 12) + 100; // Adding $100/mo estimated insurance // Using the 36% Back-end DTI Rule var maxTotalMonthlyPayment = (monthlyGrossIncome * 0.36) – monthlyDebts; // 28% Front-end DTI Rule (Housing only) var maxHousingPayment = monthlyGrossIncome * 0.28; // Take the conservative value var allowedMonthlyPayment = Math.min(maxTotalMonthlyPayment, maxHousingPayment); // Monthly Principal & Interest is the total allowed minus tax/insurance var monthlyPI = allowedMonthlyPayment – monthlyTaxInsurance; if (monthlyPI <= 0) { document.getElementById("affordabilityResult").style.display = "block"; document.getElementById("maxHomePrice").innerText = "Insufficient Income"; document.getElementById("maxMonthlyPI").innerText = "$0"; return; } var monthlyInterestRate = annualInterest / 12; var totalPayments = loanTermYears * 12; // PV = PMT * [(1 – (1 + r)^-n) / r] var loanAmount = monthlyPI * ((1 – Math.pow(1 + monthlyInterestRate, -totalPayments)) / monthlyInterestRate); var maxPrice = loanAmount + downPayment; document.getElementById("maxHomePrice").innerText = "$" + Math.round(maxPrice).toLocaleString(); document.getElementById("maxMonthlyPI").innerText = "$" + Math.round(monthlyPI).toLocaleString(); document.getElementById("totalMonthly").innerText = "$" + Math.round(allowedMonthlyPayment).toLocaleString(); document.getElementById("maxLoanAmount").innerText = "$" + Math.round(loanAmount).toLocaleString(); document.getElementById("dtiResult").innerText = "36% (Back-end)"; document.getElementById("affordabilityResult").style.display = "block"; }

Finding your dream home starts not with a realtor, but with a calculator. Understanding your home affordability is the most critical step in the mortgage process. It prevents you from falling in love with a property that might stretch your finances to the breaking point.

The 28/36 Rule Explained

Lenders typically use the 28/36 rule to determine how much they are willing to lend you. This rule focuses on two specific debt-to-income (DTI) ratios:

• The 28% Rule (Front-End Ratio): Your total monthly housing expenses (principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
• The 36% Rule (Back-End Ratio): 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.

Key Factors That Influence Your Budget

Our calculator takes several variables into account to give you a realistic estimate:

1. Gross Annual Income

This is your total income before taxes. Lenders look at stability and consistency here. If you are self-employed, they usually average your last two years of tax returns.

2. Down Payment

The more you put down, the lower your monthly payment and the higher your purchasing power. A 20% down payment also allows you to avoid Private Mortgage Insurance (PMI), which can save you hundreds monthly.

3. Interest Rates

Even a 1% difference in interest rates can change your purchasing power by tens of thousands of dollars. Higher rates mean higher monthly interest costs, which reduces the total loan amount you can afford.

Realistic Example Calculation

Let's look at a typical scenario:

Income: $80,000 per year ($6,666/month)
Monthly Debts: $500 (Car loan + Credit cards)
Down Payment: $30,000
Interest Rate: 6.5%

Using the 36% rule, the total allowed debt is $2,400. After subtracting the $500 existing debt, the allowed mortgage payment (PITI) is $1,900. Based on current rates and estimated taxes, this buyer could likely afford a home priced around $310,000.

Frequently Asked Questions

Does "affordable" mean the same as "what the bank will lend"?
Not necessarily. A bank may approve you for a loan that leaves you "house poor." Always look at your personal lifestyle budget, including travel, savings, and entertainment, before committing to the maximum loan amount.

How do property taxes affect my budget?
Property taxes vary wildly by state and county. In high-tax areas like New Jersey or Illinois, a significant portion of your monthly payment goes to taxes, which directly reduces the amount you can borrow for the house itself.

Should I include my partner's income?
If you are applying for the mortgage together, yes. Both incomes and both sets of debts will be factored into the DTI ratio by the lender.