Determining how much house you can afford is a critical step in the home-buying process. A mortgage affordability calculator helps you estimate the maximum loan amount you might qualify for, based on your financial situation. This isn't just about what a lender might approve; it's about what you can comfortably manage each month without overextending yourself.
Several key factors influence your mortgage affordability:
Annual Gross Income: This is your primary source of repayment ability. Lenders often use a debt-to-income ratio (DTI) to assess this.
Total Monthly Debt Payments: This includes existing debts like car loans, student loans, and credit card minimum payments. The lower these are, the more room you have for a mortgage payment.
Down Payment: A larger down payment reduces the loan amount needed, which can increase your affordability and potentially get you a better interest rate.
Interest Rate: Even small changes in interest rates can significantly impact your monthly payment and the total interest paid over the life of the loan.
Loan Term: Shorter loan terms generally result in higher monthly payments but less total interest paid. Longer terms mean lower monthly payments but more interest over time.
Lenders typically look at two main debt-to-income ratios:
Front-end DTI (Housing Ratio): This measures the percentage of your gross monthly income that would go towards your PITI (Principal, Interest, Taxes, and Insurance) payment. A common guideline is to keep this below 28%.
Back-end DTI (Total Debt Ratio): This measures the percentage of your gross monthly income that would go towards all your monthly debt obligations, including your PITI. A common guideline is to keep this below 36%.
This calculator provides an estimate. It's essential to get pre-approved by a lender for a definitive understanding of your borrowing power and to consult with a financial advisor for personalized advice. Remember that affordability also considers your lifestyle, savings goals, and emergency fund.
function calculateMortgageAffordability() {
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");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
var monthlyIncome = annualIncome / 12;
// General guidelines for DTI ratios (can be adjusted based on lender and borrower profile)
var maxHousingRatio = 0.28; // Front-end DTI
var maxTotalDebtRatio = 0.36; // Back-end DTI
var maxPITI = monthlyIncome * maxHousingRatio;
var maxTotalMonthlyObligations = monthlyIncome * maxTotalDebtRatio;
// Maximum allowable mortgage payment (PITI) based on total debt ratio
var maxMortgagePaymentAllowedByTotalDTI = maxTotalMonthlyObligations – monthlyDebt;
// The most restrictive of the two DTI calculations will determine the maximum PITI
var affordablePITI = Math.min(maxPITI, maxMortgagePaymentAllowedByTotalDTI);
if (affordablePITI 0 && numberOfPayments > 0) {
var factor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanAmount = affordablePITI * (factor – 1) / (monthlyInterestRate * factor);
} else if (affordablePITI > 0 && monthlyInterestRate === 0) { // Handle 0% interest rate scenario
maxLoanAmount = affordablePITI * numberOfPayments;
}
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML =
"
Estimated Affordability:
" +
"Estimated Maximum Monthly PITI Payment: $" + affordablePITI.toFixed(2) + "" +
"Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Maximum Home Price (including down payment): $" + estimatedMaxHomePrice.toFixed(2) + "" +
"Note: This is an estimate. Actual loan approval depends on lender's underwriting, credit score, property taxes, homeowner's insurance, and other factors.";
}