Plastic Surgery Cost Calculator

Home Affordability Calculator

30 Years 20 Years 15 Years 10 Years

Estimated Buying Power

Monthly P&I Payment:

Total Monthly Payment:

Recommended Loan:

Debt-to-Income Ratio: 36% (Standard)

function calculateAffordability() { var income = parseFloat(document.getElementById('annualIncome').value); var debt = parseFloat(document.getElementById('monthlyDebt').value); var down = parseFloat(document.getElementById('downPayment').value); var rateInput = parseFloat(document.getElementById('interestRate').value); var term = parseFloat(document.getElementById('loanTerm').value); var extras = parseFloat(document.getElementById('taxInsurance').value); if (isNaN(income) || isNaN(debt) || isNaN(down) || isNaN(rateInput) || isNaN(extras)) { alert("Please fill in all fields with valid numbers."); return; } // Standard 36% Debt-to-Income Rule for Conservative Lending var monthlyGross = income / 12; var maxTotalMonthlyDebt = monthlyGross * 0.36; var maxMonthlyPI = maxTotalMonthlyDebt – debt – extras; if (maxMonthlyPI <= 0) { document.getElementById('affordabilityResult').style.display = "block"; document.getElementById('maxPrice').innerHTML = "Ineligible"; document.getElementById('maxPrice').style.color = "#e74c3c"; document.getElementById('loanAmt').innerHTML = "$0"; return; } var monthlyRate = (rateInput / 100) / 12; var totalMonths = term * 12; // Loan formula: P = L * [c(1 + c)^n] / [(1 + c)^n – 1] // Reversing to find Loan (L): L = P * [(1 + c)^n – 1] / [c(1 + c)^n] var loanAmount = maxMonthlyPI * (Math.pow(1 + monthlyRate, totalMonths) – 1) / (monthlyRate * Math.pow(1 + monthlyRate, totalMonths)); var purchasePrice = loanAmount + down; document.getElementById('affordabilityResult').style.display = "block"; document.getElementById('maxPrice').style.color = "#2ecc71"; document.getElementById('maxPrice').innerHTML = "$" + purchasePrice.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); document.getElementById('monthlyPI').innerHTML = "$" + maxMonthlyPI.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('totalMonthly').innerHTML = "$" + (maxMonthlyPI + extras).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('loanAmt').innerHTML = "$" + loanAmount.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0}); }

Understanding Home Affordability: How Much House Can You Buy?

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 the math behind home affordability ensures you don't become "house poor"—spending so much on your mortgage that you cannot afford other life expenses.

The 28/36 Rule Explained

Financial advisors and lenders often use the 28/36 rule to determine a borrower's capacity. This rule suggests that:

  • Housing Expenses (28%): Your total monthly housing costs (principal, interest, taxes, and insurance) should not exceed 28% of your gross monthly income.
  • Total Debt (36%): Your total debt obligations, including your mortgage, car loans, student loans, and credit card payments, should not exceed 36% of your gross monthly income.

Our calculator uses the conservative 36% Debt-to-Income (DTI) limit to provide a safe estimate of your purchasing power.

Key Factors Impacting Your Results

Several variables change the "sticker price" of the home you can afford, even if your income remains the same:

  1. Interest Rates: A 1% increase in interest rates can reduce your buying power by approximately 10%. Lower rates allow more of your monthly payment to go toward the principal balance.
  2. The Down Payment: The more cash you bring to the closing table, the lower your loan-to-value ratio. This results in smaller monthly payments and can eliminate the need for Private Mortgage Insurance (PMI).
  3. Existing Debt: Since lenders look at your total debt-to-income ratio, a high car payment or significant student loan balance directly reduces the amount a bank will lend you for a home.

Real-World Example

Imagine a household with an annual gross income of $100,000. Their monthly gross income is $8,333. Based on the 36% rule, their total allowable debt is $3,000 per month.

If they have a $400 monthly car payment and $100 in student loans, they have $2,500 remaining for their mortgage, taxes, and insurance. If property taxes and insurance cost $500 monthly, they have $2,000 left for the Principal and Interest (P&I) payment. At a 6.5% interest rate on a 30-year term, that $2,000 payment supports a loan of approximately $316,000. With a $50,000 down payment, their total home affordability is $366,000.

Tips for Increasing Your Budget

If the calculator results are lower than expected, consider these strategies:

  • Pay down high-interest debt: Reducing your monthly debt obligations directly increases your DTI headroom.
  • Improve your credit score: A higher credit score qualifies you for lower interest rates, making expensive homes more affordable.
  • Increase your down payment: Saving for a few more months can significantly lower your monthly commitment.

Leave a Reply

Your email address will not be published. Required fields are marked *