Determining how much house you can afford is a crucial step in the home-buying process. The Mortgage Affordability Calculator is designed to give you an estimated maximum home price you might be able to purchase, considering your income, existing debts, and estimated homeownership costs.
Key Factors in Mortgage Affordability:
Annual Gross Income: This is your total income before taxes and deductions. Lenders use this as a primary indicator of your ability to repay a loan.
Other Monthly Debt Payments: This includes payments for car loans, student loans, credit cards, and any other recurring debt. Reducing these can significantly increase your borrowing power.
Down Payment: A larger down payment reduces the amount you need to borrow, lowers your loan-to-value (LTV) ratio, and can help you avoid Private Mortgage Insurance (PMI).
Interest Rate: The annual interest rate directly impacts your monthly mortgage payment. Lower rates mean lower payments and potentially a larger loan amount you can afford.
Loan Term: The length of the mortgage (e.g., 15, 30 years). Longer terms result in lower monthly payments but higher total interest paid over the life of the loan.
Property Taxes: These are annual taxes levied by local governments based on the assessed value of your property. They are typically paid monthly as part of your mortgage payment (escrow).
Homeowners Insurance: This protects your home against damage from events like fire, theft, and natural disasters. It's also usually paid monthly through escrow.
Private Mortgage Insurance (PMI): If your down payment is less than 20% of the home's purchase price, lenders typically require PMI to protect themselves against the risk of default. This adds to your monthly cost.
How the Calculator Works:
The calculator estimates your maximum affordable home price by considering two common lender guidelines:
Front-End Ratio (Housing Ratio): This guideline suggests that your total monthly housing costs (principal, interest, property taxes, insurance, and PMI – often called PITI) should not exceed a certain percentage of your gross monthly income (typically 28% to 31%).
Back-End Ratio (Debt-to-Income Ratio): This guideline states that your total monthly debt payments (including PITI and all other monthly debt obligations) should not exceed a certain percentage of your gross monthly income (typically 36% to 43%).
The calculator takes your inputs, estimates the potential monthly PITI based on different loan amounts, and checks them against these ratios. It also factors in your down payment to determine the maximum loan amount you could qualify for and thus the maximum home price.
Example Calculation:
Let's say your Annual Gross Income is $90,000, and you have Other Monthly Debt Payments of $400. Your Down Payment is $30,000. You're looking at an Estimated Annual Interest Rate of 6.5% for a Loan Term of 30 years. You estimate Annual Property Tax Rate at 1.1%, Annual Homeowners Insurance at $1,500, and Annual PMI Rate at 0.7% (since your down payment is less than 20% of a potential home price).
The calculator will work backward to find the largest loan amount that satisfies the DTI and housing ratios, then add your down payment to suggest a maximum affordable home price.
Disclaimer: This calculator provides an estimate only and should not be considered financial advice. Your actual mortgage approval amount may vary based on lender-specific criteria, credit score, loan programs, and market conditions. Consult with a mortgage professional for personalized guidance.
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) / 100;
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var propertyTaxRate = parseFloat(document.getElementById("propertyTaxRate").value) / 100;
var homeownersInsurance = parseFloat(document.getElementById("homeownersInsurance").value);
var pmiRate = parseFloat(document.getElementById("pmiRate").value) / 100;
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(propertyTaxRate) || isNaN(homeownersInsurance) || isNaN(pmiRate)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxMonthlyHousingPayment = grossMonthlyIncome * 0.31; // Using 31% as a common front-end ratio
var maxTotalDebtPayment = grossMonthlyIncome * 0.43; // Using 43% as a common back-end ratio
var maxMonthlyNonHousingDebt = maxTotalDebtPayment – monthlyDebt;
// We need to find the maximum loan amount. This is iterative or can be solved algebraically.
// We'll use an iterative approach to find the loan amount where PITI + PMI fits within the ratios.
var maxAffordablePrice = 0;
var step = 10000; // Start with larger steps and refine
var currentMaxLoan = 0;
// Let's try to estimate a loan amount and iterate
// A rough upper bound could be grossMonthlyIncome * 12 * 10 (assuming a max DTI of 43% and 30 year term at low interest)
var maxPossibleLoanEstimate = grossMonthlyIncome * 43 * 12 / 100; // Very rough estimate
for (var loanAmount = step; loanAmount 0) {
principalAndInterest = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
principalAndInterest = loanAmount / numberOfPayments; // Handle 0% interest rate
}
// Estimate property tax and insurance based on a hypothetical home price
// We'll assume the home price is approximately loanAmount + downPayment for estimation purposes
var estimatedHomePrice = loanAmount + downPayment;
var monthlyPropertyTax = (estimatedHomePrice * propertyTaxRate) / 12;
var monthlyHomeownersInsurance = homeownersInsurance / 12;
var monthlyPMI = (loanAmount * pmiRate) / 12;
var totalMonthlyHousingPayment = principalAndInterest + monthlyPropertyTax + monthlyHomeownersInsurance + monthlyPMI;
// Check if PITI + PMI is within the front-end ratio
var passesFrontEndRatio = totalMonthlyHousingPayment <= maxMonthlyHousingPayment;
// Check if Total Debt (PITI + PMI + Other Debt) is within the back-end ratio
var totalMonthlyObligations = totalMonthlyHousingPayment + monthlyDebt;
var passesBackEndRatio = totalMonthlyObligations <= maxTotalDebtPayment;
if (passesFrontEndRatio && passesBackEndRatio) {
currentMaxLoan = loanAmount;
} else {
// If we exceed either ratio, this loan amount is too high.
// We can break or continue to refine. For simplicity, we'll use the last valid loan amount.
// However, to find the MOST affordable price, we need to be more precise.
// A binary search or more granular iteration would be better, but for this example,
// we'll assume the last successful loan amount is a good approximation.
// Let's refine the search around the last successful loan amount
var refinedMaxLoan = 0;
var refineStep = step / 100; // Refine in smaller steps
for(var refinedLoan = Math.max(0, currentMaxLoan – step); refinedLoan 0) {
refinedPrincipalAndInterest = refinedLoan * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
refinedPrincipalAndInterest = refinedLoan / numberOfPayments;
}
var refinedEstimatedHomePrice = refinedLoan + downPayment;
var refinedMonthlyPropertyTax = (refinedEstimatedHomePrice * propertyTaxRate) / 12;
var refinedMonthlyHomeownersInsurance = homeownersInsurance / 12;
var refinedMonthlyPMI = (refinedLoan * pmiRate) / 12;
var refinedTotalMonthlyHousingPayment = refinedPrincipalAndInterest + refinedMonthlyPropertyTax + refinedMonthlyHomeownersInsurance + refinedMonthlyPMI;
var refinedTotalMonthlyObligations = refinedTotalMonthlyHousingPayment + monthlyDebt;
if (refinedTotalMonthlyHousingPayment <= maxMonthlyHousingPayment && refinedTotalMonthlyObligations <= maxTotalDebtPayment) {
refinedMaxLoan = refinedLoan;
} else {
break; // Stop refining if we exceed limits
}
}
currentMaxLoan = refinedMaxLoan;
break; // Exit the outer loop once we found the limit
}
}
maxAffordablePrice = currentMaxLoan + downPayment;
// Ensure the result is not negative or zero if inputs were valid but didn't yield a positive price
if (maxAffordablePrice <= downPayment) {
maxAffordablePrice = 0;
}
var formattedMaxAffordablePrice = maxAffordablePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedGrossMonthlyIncome = grossMonthlyIncome.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxMonthlyHousingPayment = maxMonthlyHousingPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxTotalDebtPayment = maxTotalDebtPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = `
Based on your inputs:
Your estimated maximum affordable home price is: ${formattedMaxAffordablePrice}
(This is based on a maximum loan amount of ${currentMaxLoan.toLocaleString(undefined, { style: 'currency', currency: 'USD' })})
Your estimated maximum monthly housing payment (PITI + PMI) should be no more than: ${formattedMaxMonthlyHousingPayment}
Your total estimated monthly debt obligations (including housing) should be no more than: ${formattedMaxTotalDebtPayment}