Determining how much house you can afford is a crucial first step in the home-buying process. This calculator helps you estimate your potential borrowing capacity based on your financial situation. It considers your income, existing debt obligations, down payment, and the terms of the mortgage you might seek.
Key Factors:
Annual Gross Income: This is your total income before taxes and other deductions. Lenders use this as a primary indicator of your ability to repay a loan.
Total Monthly Debt Payments: This includes car loans, student loans, credit card minimum payments, and any other recurring debts you have. Reducing these can significantly improve your affordability.
Down Payment: A larger down payment reduces the amount you need to borrow, thereby lowering your monthly payments and potentially securing better interest rates.
Interest Rate: Even small changes in the interest rate can have a substantial impact on your monthly payment and the total cost of the loan over time.
Loan Term: A longer loan term (e.g., 30 years) results in lower monthly payments but a higher total interest paid compared to a shorter term (e.g., 15 years).
Lenders typically use debt-to-income (DTI) ratios to assess affordability. A common guideline is that your total monthly debt payments (including the proposed mortgage payment) should not exceed 43% of your gross monthly income. This calculator provides an estimate, and your actual borrowing power may vary based on lender criteria, credit score, and other individual financial factors.
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxTotalMonthlyObligation = grossMonthlyIncome * 0.43; // Common DTI limit of 43%
// Calculate maximum allowable mortgage payment
var maxMortgagePayment = maxTotalMonthlyObligation – monthlyDebt;
if (maxMortgagePayment 0) {
// Formula for present value of an annuity (loan amount)
maxLoanAmount = maxMortgagePayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
// If interest rate is 0 (unlikely for mortgage, but for completeness)
maxLoanAmount = maxMortgagePayment * numberOfPayments;
}
var estimatedHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML = "Estimated Maximum Home Price: $" + estimatedHomePrice.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "";
resultDiv.innerHTML += "Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "";
resultDiv.innerHTML += "Estimated Maximum Monthly Mortgage Payment (P&I): $" + maxMortgagePayment.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "";
}