Determine how much house you can realistically afford by entering your financial details.
Understanding Mortgage Affordability
Buying a home is a significant financial decision, and understanding how much you can afford is crucial. The Mortgage Affordability Calculator helps you estimate the maximum home price you might qualify for based on your income, existing debts, down payment, and prevailing interest rates.
Key Factors Affecting Affordability:
Gross Annual Income: This is your total income before taxes and deductions. Lenders use this to determine your ability to handle monthly payments.
Monthly Debt Payments: This includes minimum payments on credit cards, car loans, student loans, personal loans, and any other recurring debts. High debt-to-income ratios can significantly reduce your borrowing capacity.
Down Payment: The amount you pay upfront reduces the loan amount needed. A larger down payment generally leads to a lower monthly payment and potentially better loan terms.
Interest Rate: This is the cost of borrowing money. Even a small difference in interest rates can have a substantial impact on your monthly payments and the total interest paid over the life of the loan.
Loan Term: This is the number of years you have to repay the loan. Shorter terms usually mean higher monthly payments but less interest paid overall. Longer terms result in lower monthly payments but more interest paid.
Lenders typically use guidelines like the front-end ratio (housing costs to income) and the back-end ratio (total debt payments to income) to assess affordability. While this calculator provides an estimate, it's essential to get pre-approved by a lender for a precise understanding of your borrowing power.
How the Calculation Works:
The calculator first estimates the maximum monthly mortgage payment you can afford, often based on a common guideline that your total housing costs (principal, interest, taxes, insurance – PITI) should not exceed a certain percentage of your gross monthly income (e.g., 28%). It then subtracts your existing monthly debt payments to determine the maximum P&I (principal and interest) payment you can handle. Using the loan term and interest rate, it calculates the maximum loan amount you can borrow. Finally, it adds your down payment to this loan amount to arrive at an estimated maximum home price.
function calculateAffordability() {
var grossAnnualIncome = parseFloat(document.getElementById("grossAnnualIncome").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(grossAnnualIncome) || grossAnnualIncome <= 0 ||
isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTermYears) || loanTermYears <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Common affordability guideline: Total housing costs (PITI) should not exceed 28% of gross monthly income.
// Back-end ratio guideline: Total debt payments (including PITI) should not exceed 36% of gross monthly income.
// We'll use the more restrictive back-end ratio to be conservative.
var grossMonthlyIncome = grossAnnualIncome / 12;
var maxTotalDebtPayment = grossMonthlyIncome * 0.36; // 36% back-end ratio
// The portion of maxTotalDebtPayment available for P&I (Principal & Interest)
var maxPiPayment = maxTotalDebtPayment – monthlyDebtPayments;
// Ensure maxPiPayment is not negative
if (maxPiPayment 0) {
principalLoanAmount = maxPiPayment * (Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths));
} else { // Handle 0% interest rate scenario
principalLoanAmount = maxPiPayment * loanTermMonths;
}
// Estimate maximum affordable home price
var estimatedMaxHomePrice = principalLoanAmount + downPayment;
// Display results
resultDiv.innerHTML = "Estimated Maximum Home Price: $" + estimatedMaxHomePrice.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,') + "" +
"Estimated Maximum Loan Amount: $" + principalLoanAmount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,') + "" +
"Estimated Maximum Monthly P&I Payment: $" + maxPiPayment.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,') + "";
}