function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var otherMonthlyDebts = parseFloat(document.getElementById("otherMonthlyDebts").value);
var availableSavings = parseFloat(document.getElementById("availableSavings").value);
var desiredDownPaymentPercent = parseFloat(document.getElementById("desiredDownPaymentPercent").value);
var annualPropertyTax = parseFloat(document.getElementById("annualPropertyTax").value);
var annualInsurance = parseFloat(document.getElementById("annualInsurance").value);
var monthlyHOA = parseFloat(document.getElementById("monthlyHOA").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var estimatedMortgageRate = parseFloat(document.getElementById("estimatedMortgageRate").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(annualIncome) || annualIncome < 0 ||
isNaN(otherMonthlyDebts) || otherMonthlyDebts < 0 ||
isNaN(availableSavings) || availableSavings < 0 ||
isNaN(desiredDownPaymentPercent) || desiredDownPaymentPercent 100 ||
isNaN(annualPropertyTax) || annualPropertyTax < 0 ||
isNaN(annualInsurance) || annualInsurance < 0 ||
isNaN(monthlyHOA) || monthlyHOA < 0 ||
isNaN(loanTermYears) || loanTermYears <= 0 ||
isNaN(estimatedMortgageRate) || estimatedMortgageRate < 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields. Down Payment Percentage must be between 0 and 100.";
return;
}
// Constants (common DTI ratios)
var maxBackEndDTI = 0.36; // 36% Debt-to-Income ratio
// 1. Calculate Gross Monthly Income
var grossMonthlyIncome = annualIncome / 12;
// 2. Calculate Maximum Allowed Total Monthly Debt Payment (including potential mortgage)
var maxTotalMonthlyDebtPayment = grossMonthlyIncome * maxBackEndDTI;
// 3. Calculate Maximum Allowed Monthly Housing Payment (PITI + HOA)
var maxMonthlyHousingPayment = maxTotalMonthlyDebtPayment – otherMonthlyDebts;
if (maxMonthlyHousingPayment <= 0) {
resultDiv.innerHTML = "Based on your current debts and income, your maximum allowed monthly housing payment is too low. You may not be able to afford a home at this time.";
return;
}
// 4. Calculate Monthly Property Tax and Insurance
var monthlyPropertyTax = annualPropertyTax / 12;
var monthlyInsurance = annualInsurance / 12;
// 5. Calculate Maximum Allowed Monthly Principal & Interest (P&I) Payment
var maxMonthlyPI = maxMonthlyHousingPayment – monthlyPropertyTax – monthlyInsurance – monthlyHOA;
if (maxMonthlyPI <= 0) {
resultDiv.innerHTML = "Based on your estimated property taxes, insurance, and HOA fees, your maximum allowed monthly Principal & Interest payment is too low. You may not be able to afford a home at this time.";
return;
}
// 6. Calculate Max Loan Amount from P&I
var monthlyInterestRate = (estimatedMortgageRate / 100) / 12;
var numberOfPayments = loanTermYears * 12;
var maxLoanAmount = 0;
if (monthlyInterestRate === 0) { // Handle 0% interest rate
maxLoanAmount = maxMonthlyPI * numberOfPayments;
} else {
maxLoanAmount = maxMonthlyPI * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
}
if (maxLoanAmount 0) {
maxHomePriceFromSavings = availableSavings / (desiredDownPaymentPercent / 100);
} else { // If desiredDownPaymentPercent is 0, then savings don't limit the home price based on DP%
maxHomePriceFromSavings = Infinity;
}
// 9. Final Max Affordable Home Price
var maxAffordableHomePrice = Math.min(maxHomePriceFromLoan, maxHomePriceFromSavings);
if (maxAffordableHomePrice <= 0 || maxAffordableHomePrice === Infinity) {
resultDiv.innerHTML = "We couldn't determine an affordable home price based on your inputs. Please review your figures, especially income, debts, and desired down payment.";
return;
}
// Calculate estimated down payment for the max affordable home price
var estimatedDownPayment = maxAffordableHomePrice * (desiredDownPaymentPercent / 100);
// Ensure down payment doesn't exceed available savings if maxAffordableHomePrice was limited by loan affordability
estimatedDownPayment = Math.min(estimatedDownPayment, availableSavings);
// Recalculate loan amount based on final affordable home price and estimated down payment
var finalLoanAmount = maxAffordableHomePrice – estimatedDownPayment;
// Recalculate monthly P&I based on final loan amount
var finalMonthlyPI = 0;
if (monthlyInterestRate === 0) {
finalMonthlyPI = finalLoanAmount / numberOfPayments;
} else {
finalMonthlyPI = finalLoanAmount * monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
var totalEstimatedMonthlyHousingCosts = finalMonthlyPI + monthlyPropertyTax + monthlyInsurance + monthlyHOA;
// Display results
resultDiv.innerHTML =
"Maximum Affordable Home Price: $" + maxAffordableHomePrice.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + "" +
"Estimated Down Payment Required: $" + estimatedDownPayment.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + "" +
"Estimated Monthly Mortgage Payment (P&I): $" + finalMonthlyPI.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + "" +
"Total Estimated Monthly Housing Costs (PITI + HOA): $" + totalEstimatedMonthlyHousingCosts.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + "" +
"This calculation assumes a maximum back-end Debt-to-Income (DTI) ratio of " + (maxBackEndDTI * 100) + "%. Lenders may have different requirements.";
}
Understanding How Much Home You Can Afford
Buying a home is one of the biggest financial decisions you'll ever make. Before you start house hunting, it's crucial to understand how much home you can realistically afford. This isn't just about the sticker price; it involves a complex interplay of your income, existing debts, savings, and ongoing housing expenses.
Key Factors Influencing Your Home Affordability
Our Home Affordability Calculator takes several critical factors into account to give you a realistic estimate:
Your Gross Annual Income: This is your total income before taxes and deductions. Lenders use this to determine your borrowing capacity. A higher income generally means you can afford a more expensive home.
Your Total Monthly Debt Payments (excluding potential mortgage): This includes payments for car loans, student loans, credit cards, and any other recurring monthly debt. These obligations reduce the amount of income available for a mortgage payment.
Your Available Savings for Down Payment: The cash you have on hand for a down payment is a significant factor. A larger down payment reduces the amount you need to borrow, lowers your monthly mortgage payments, and can sometimes secure a better interest rate.
Desired Down Payment Percentage: This is the percentage of the home's purchase price you plan to pay upfront. While 20% is often recommended to avoid Private Mortgage Insurance (PMI), many programs allow for much lower down payments.
Estimated Annual Property Taxes: Property taxes are a recurring cost that varies significantly by location. They are typically included in your total monthly housing payment (PITI – Principal, Interest, Taxes, Insurance).
Estimated Annual Homeowner's Insurance: This protects your home from damage and is usually required by lenders. Like property taxes, it's part of your monthly housing costs.
Estimated Monthly HOA Fees (if applicable): If you're considering a condo, townhouse, or a home in a planned community, you'll likely have Homeowner's Association (HOA) fees. These cover maintenance of common areas and amenities and add to your monthly housing expenses.
Desired Loan Term (Years): The length of your mortgage (e.g., 15, 20, or 30 years). A shorter loan term means higher monthly payments but less interest paid over the life of the loan. A longer term means lower monthly payments but more interest.
Estimated Mortgage Interest Rate: The interest rate directly impacts your monthly mortgage payment. Even a small difference in the rate can significantly affect your affordability over the loan term.
How the Calculator Works: The Debt-to-Income (DTI) Ratio
Our calculator primarily uses the Debt-to-Income (DTI) ratio, a key metric lenders use to assess your ability to manage monthly payments and repay debts. It's expressed as a percentage of your gross monthly income that goes towards debt payments.
The calculator uses a common "back-end" DTI ratio (typically 36%). This means your total monthly debt payments—including your estimated new mortgage payment (Principal & Interest), property taxes, homeowner's insurance, HOA fees, and your existing monthly debts—should not exceed 36% of your gross monthly income.
By working backward from this maximum allowable monthly housing payment, and considering your available down payment, the calculator estimates the maximum home price you can realistically afford.
Important Considerations
Beyond the Calculator: This tool provides an estimate. Your actual affordability may vary based on lender-specific criteria, credit score, and other financial factors.
Closing Costs: Remember that buying a home involves additional upfront costs beyond the down payment, such as closing costs (loan origination fees, appraisal fees, title insurance, etc.), which can range from 2% to 5% of the loan amount. Ensure you have savings allocated for these.
Emergency Fund: It's wise to maintain an emergency fund of at least 3-6 months of living expenses after your home purchase.
Future Expenses: Factor in potential future home maintenance, utility costs, and furnishing expenses.
Use this calculator as a starting point to guide your home-buying journey. Consulting with a financial advisor and a mortgage lender can provide personalized advice tailored to your unique situation.