Calculate Mass Excise Tax

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Home Affordability Calculator

Find out exactly how much home you can afford based on the 28/36 debt-to-income rule.

30 Years Fixed 20 Years Fixed 15 Years Fixed 10 Years Fixed
Monthly Gross Income:
Max Allowed Monthly Payment (PITI):
Estimated Monthly Insurance/Tax:
Recommended Max Home Price:

How Much Home Can I Afford? Understanding the Rules

Buying a home is the largest investment most people will ever make. To ensure financial stability, lenders use specific metrics to determine your borrowing capacity. Our Home Affordability Calculator uses the industry-standard "28/36 Rule" to give you a realistic estimate.

The 28/36 Debt-to-Income Rule

Lenders typically look at two specific ratios to determine if you qualify for a mortgage:

  • The 28% Front-End Ratio: Your total monthly housing costs (Principal, Interest, Taxes, and Insurance – PITI) should not exceed 28% of your gross monthly income.
  • The 36% Back-End Ratio: Your total monthly debt obligations (including the new mortgage plus car loans, student loans, and credit cards) should not exceed 36% of your gross monthly income.

Factors That Impact Your Purchase Power

While income is the primary factor, several other variables play a crucial role in the final calculation:

  • Interest Rates: Even a 1% change in interest rates can shift your buying power by tens of thousands of dollars. Higher rates mean higher monthly interest payments, which reduces the principal amount you can borrow.
  • Down Payment: The larger your down payment, the lower your loan-to-value ratio. This often results in better interest rates and removes the need for Private Mortgage Insurance (PMI) if you put down 20% or more.
  • Property Taxes & Insurance: These vary significantly by location. A $400,000 home in Texas (high property tax) will have a much higher monthly payment than a $400,000 home in Alabama (low property tax).

Example Calculation

Imagine a household with an annual income of $100,000 and $400 in monthly debts. Using a 30-year fixed rate of 6.5%:

  1. Monthly Gross Income = $8,333
  2. 28% Limit = $2,333 | 36% Limit minus debts = $2,600
  3. The lower of the two ($2,333) is the max monthly PITI payment.
  4. After accounting for taxes and insurance, the sustainable mortgage amount would be roughly $320,000.
  5. Adding a $50,000 down payment brings the total home price to $370,000.

Tips to Increase Your Affordability

If the result from the calculator is lower than your target home price, consider these strategies:

  • Reduce Existing Debt: Paying off a car loan or credit card can significantly improve your back-end ratio.
  • Improve Your Credit Score: A higher score unlocks lower interest rates, directly increasing the loan amount you qualify for.
  • Shop Different Areas: Look for municipalities with lower property tax rates to keep your PITI payment within the 28% threshold.
function calculateAffordability() { // Get Input Values var annualIncome = parseFloat(document.getElementById("annualIncome").value); var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value); var downPayment = parseFloat(document.getElementById("downPayment").value); var annualRate = parseFloat(document.getElementById("interestRate").value); var loanYears = parseInt(document.getElementById("loanTerm").value); var taxRate = parseFloat(document.getElementById("propertyTax").value); // Validation if (isNaN(annualIncome) || annualIncome <= 0) { alert("Please enter a valid annual income."); return; } // Calculations var monthlyIncome = annualIncome / 12; // 28/36 Rule Logic var frontEndLimit = monthlyIncome * 0.28; var backEndLimit = (monthlyIncome * 0.36) – monthlyDebt; // The effective max monthly payment (PITI) is the lower of the two var maxMonthlyPITI = Math.min(frontEndLimit, backEndLimit); if (maxMonthlyPITI <= 0) { alert("Your current debt levels are too high relative to your income for a standard mortgage."); return; } // Estimate Taxes and Insurance (approx 1.5% of home value annually as a buffer) // Formula: MaxPITI = MonthlyMortgage + (HomePrice * (taxRate + 0.3% for insurance) / 12) // This requires solving for HomePrice. // MonthlyMortgage = (HomePrice – DownPayment) * [i(1+i)^n] / [(1+i)^n – 1] var monthlyRate = (annualRate / 100) / 12; var numPayments = loanYears * 12; // Monthly factor for principal and interest var pAndIFactor = (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1); // Monthly factor for Tax and Insurance (Estimated 0.3% annual for insurance) var taxInsFactor = ((taxRate / 100) + 0.003) / 12; // Algebraic Solution: // maxPITI = (HomePrice – DownPayment) * pAndIFactor + (HomePrice * taxInsFactor) // maxPITI = HomePrice * pAndIFactor – DownPayment * pAndIFactor + HomePrice * taxInsFactor // maxPITI + DownPayment * pAndIFactor = HomePrice * (pAndIFactor + taxInsFactor) var maxHomePrice = (maxMonthlyPITI + (downPayment * pAndIFactor)) / (pAndIFactor + taxInsFactor); var finalLoanAmount = maxHomePrice – downPayment; var monthlyPAndI = finalLoanAmount * pAndIFactor; var monthlyTaxIns = maxMonthlyPITI – monthlyPAndI; // Display Results document.getElementById("resMonthlyIncome").innerText = "$" + monthlyIncome.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("resMaxPayment").innerText = "$" + maxMonthlyPITI.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("resTaxIns").innerText = "$" + monthlyTaxIns.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("resHomePrice").innerText = "$" + Math.round(maxHomePrice).toLocaleString(); document.getElementById("resultBox").style.display = "block"; // Smooth scroll to result document.getElementById("resultBox").scrollIntoView({ behavior: 'smooth', block: 'nearest' }); }

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