Estimate how much home you can potentially afford. This calculator helps you understand your borrowing capacity based on your income, debts, and down payment.
30 years
6.0%
Your Estimated Home Affordability
$0
This is an estimate and not a loan pre-approval. Consult with a mortgage lender for precise figures.
Understanding Mortgage Affordability
Determining how much home you can afford is a crucial first step in the home-buying process. It goes beyond just looking at the sticker price of a house; it involves understanding your financial picture, the costs associated with homeownership, and how lenders evaluate your ability to repay a loan.
Key Factors Influencing Affordability:
Income: Your gross annual household income is a primary factor. Lenders use this to assess your ability to handle monthly payments.
Existing Debt: Recurring monthly debt payments (car loans, student loans, credit card minimums) reduce the amount of income available for a mortgage.
Down Payment: A larger down payment reduces the loan amount needed, lowers your loan-to-value ratio, and can decrease your monthly payments and potentially the interest rate.
Interest Rate: Even small changes in the interest rate can significantly impact your monthly payment and the total interest paid over the life of the loan.
Loan Term: A longer loan term (e.g., 30 years) results in lower monthly payments but more interest paid overall compared to a shorter term (e.g., 15 years).
Property Taxes and Insurance (PITI): While not directly calculated in this affordability estimate, remember that your actual monthly housing cost will include Principal, Interest, Taxes, and Insurance.
How This Calculator Works:
This calculator uses a common rule of thumb and lender guidelines to provide an estimate. A widely used guideline suggests that your total housing expenses (including mortgage principal, interest, property taxes, and homeowner's insurance – often referred to as PITI) should not exceed 28% of your gross monthly income. Additionally, your total debt-to-income ratio (DTI), which includes your proposed mortgage payment plus all other recurring monthly debts, should ideally not exceed 36% of your gross monthly income. This calculator focuses on estimating the maximum loan amount you might qualify for, considering these principles.
The Calculation (Simplified):
Calculate Maximum Allowable Monthly Housing Payment: This is typically capped at 28% of your gross monthly income.
Determine Maximum Allowable Monthly Mortgage Payment: Subtract your estimated monthly property taxes and homeowner's insurance (often estimated as a percentage of the home value) from the maximum allowable monthly housing payment. For simplicity in this calculator, we'll focus on the principal and interest portion.
Estimate Maximum Loan Amount: Using the standard mortgage payment formula (PMT = P [r(1+r)^n] / [(1+r)^n – 1]), we rearrange it to solve for P (the loan principal). The formula to estimate the maximum loan amount based on a target monthly payment (P&I) is:
P = M * [((1 + r)^n - 1) / (r * (1 + r)^n)]
Where:
P = Principal loan amount (what we want to find)
M = Maximum monthly payment you can afford for Principal & Interest (calculated based on income and debt, this calculator infers it)
n = Total number of payments (Loan Term in Years * 12)
Calculate Total Affordable Home Price: Add your Down Payment to the calculated Maximum Loan Amount.
Important Note: This calculator provides a simplified estimate. Actual mortgage approval depends on a lender's specific underwriting criteria, credit score, employment history, reserves, and other factors. The 28% and 36% ratios are guidelines and can vary. For accurate pre-approval, please consult with a qualified mortgage professional.
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var resultElement = document.getElementById("affordableAmount");
if (isNaN(annualIncome) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(loanTerm) || isNaN(interestRate)) {
resultElement.textContent = "Please enter valid numbers.";
resultElement.style.color = "#dc3545"; // Red for error
return;
}
if (annualIncome <= 0) {
resultElement.textContent = "Annual income must be positive.";
resultElement.style.color = "#dc3545";
return;
}
var grossMonthlyIncome = annualIncome / 12;
// Using a common guideline: Housing expenses (PITI) <= 28% of gross monthly income
// And total debt (PITI + other debts) <= 36% of gross monthly income
// For this calculator, we'll derive the maximum loan amount by estimating the P&I payment.
// A conservative approach assumes P&I might be around 25-30% of gross monthly income,
// leaving room for taxes and insurance within the 28% total housing.
// Let's target a P&I payment that fits within ~25% of gross monthly income, ensuring total DTI stays below 36%.
var maxPIMonthlyPaymentTarget = grossMonthlyIncome * 0.25; // Target for Principal & Interest
var maxTotalDebtPaymentAllowed = grossMonthlyIncome * 0.36;
var maxMortgagePaymentAllowed = maxTotalDebtPaymentAllowed – monthlyDebtPayments;
// The actual P&I payment we can afford is the lesser of the two targets
var pmt = Math.min(maxPIMonthlyPaymentTarget, maxMortgagePaymentAllowed);
if (pmt 0) {
// Formula for Present Value (Loan Amount) based on annuity payment
// PV = PMT * [1 – (1 + r)^-n] / r
maxLoanAmount = pmt * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
// Handle zero interest rate case (though unlikely for mortgages)
maxLoanAmount = pmt * numberOfPayments;
}
var affordableHomePrice = maxLoanAmount + downPayment;
// Format the result
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0
});
resultElement.textContent = formatter.format(affordableHomePrice);
resultElement.style.color = "#28a745"; // Success green
}