Determining how much house you can afford is a crucial step in the homebuying process. This calculator helps you estimate your maximum affordable mortgage loan amount by considering various factors that lenders and financial experts use. It's designed to give you a realistic picture of your borrowing capacity.
Key Factors Explained:
Annual Gross Income: This is your total income before taxes are deducted. Lenders often use a debt-to-income (DTI) ratio, where your housing costs plus other debts should not exceed a certain percentage of your gross income (typically around 43%).
Total Monthly Debt Payments: This includes all your existing monthly financial obligations like car loans, student loans, credit card minimums, and personal loans. These debts reduce the amount of money you have available for a mortgage payment.
Down Payment: The upfront cash you pay towards the purchase price of the home. A larger down payment reduces the loan amount needed and can lead to better loan terms, potentially avoiding Private Mortgage Insurance (PMI).
Estimated Annual Interest Rate: The yearly percentage charged by the lender for borrowing money. A lower interest rate means a lower monthly payment for the same loan amount.
Loan Term (Years): The duration over which you agree to repay the loan. Common terms are 15 or 30 years. Longer terms result in lower monthly payments but more interest paid over time.
Estimated Annual Property Taxes: Taxes levied by your local government on your property's value. These are typically paid monthly as part of your mortgage escrow.
Estimated Annual Homeowner's Insurance: Insurance that protects your home against damage from events like fire, theft, or natural disasters. Also usually paid monthly through escrow.
Estimated Private Mortgage Insurance (PMI) Rate: If your down payment is less than 20% of the home's purchase price, lenders typically require PMI to protect themselves. This is an additional monthly cost.
How the Calculator Works:
This calculator estimates your maximum affordable monthly housing payment by subtracting your existing monthly debt payments from a portion of your gross income. It then uses this estimated maximum monthly housing payment, along with your down payment, interest rate, loan term, and estimated property taxes, insurance, and PMI, to calculate the maximum mortgage loan you could potentially afford.
Disclaimer: This calculator provides an estimate for informational purposes only and does not constitute a loan approval or financial advice. Actual loan approval and terms depend on a lender's specific underwriting criteria, your credit score, and other factors. Consult with a mortgage professional for personalized guidance.
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 propertyTaxes = parseFloat(document.getElementById("propertyTaxes").value);
var homeInsurance = parseFloat(document.getElementById("homeInsurance").value);
var pmiRate = parseFloat(document.getElementById("pmiRate").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0 ||
isNaN(propertyTaxes) || propertyTaxes < 0 ||
isNaN(homeInsurance) || homeInsurance < 0 ||
isNaN(pmiRate) || pmiRate < 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Assumptions for DTI ratio (common lender guidelines)
var maxDTI = 0.43; // 43% Debt-to-Income Ratio
var maxHousingRatio = 0.28; // 28% of Gross Income for Housing (PITI)
var monthlyIncome = annualIncome / 12;
var maxTotalMonthlyPayment = monthlyIncome * maxDTI;
var maxHousingPayment = monthlyIncome * maxHousingRatio;
// Calculate total monthly debt payments
var totalMonthlyObligations = monthlyDebt;
// Calculate maximum affordable monthly PITI (Principal, Interest, Taxes, Insurance)
// We will use the more conservative of the two ratios (maxDTI vs maxHousingRatio)
var maxAffordablePITI = Math.min(maxTotalMonthlyPayment – totalMonthlyObligations, maxHousingPayment);
if (maxAffordablePITI = 20%, PMI is usually not required.
var estimatedMaxLoanAmount = 0;
var monthlyPMI = 0;
if (pmiRate > 0) {
// To estimate PMI, we need an initial guess for the loan amount.
// Let's assume maxAffordablePITI is entirely for P&I for now and refine.
// A simplified approach is to estimate PMI as a percentage of the *potential* loan.
// We'll need to iteratively refine or make an assumption.
// For simplicity here, we'll make a rough estimate based on loan amount later.
// A more accurate calculation might require iteration.
// Let's assume PMI is paid on the loan amount.
// For now, we'll calculate the loan amount without PMI and then check if PMI is needed.
}
// Calculate maximum loan amount based on P&I + Taxes + Insurance
var monthlyPrincipalAndInterest = maxAffordablePITI – monthlyPropertyTaxes – monthlyHomeInsurance;
if (monthlyPrincipalAndInterest 0) {
maxLoanAmountWithoutPMI = monthlyPrincipalAndInterest * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
} else { // Handle 0% interest rate, though unlikely for mortgages
maxLoanAmountWithoutPMI = monthlyPrincipalAndInterest * numberOfPayments;
}
// Now consider PMI. If downPayment is less than 20% of the *total purchase price*, PMI is likely needed.
// Purchase Price = maxLoanAmountWithoutPMI + downPayment
var estimatedPurchasePrice = maxLoanAmountWithoutPMI + downPayment;
var requiredDownPaymentPercentage = downPayment / estimatedPurchasePrice;
var finalMaxLoanAmount = maxLoanAmountWithoutPMI;
var actualMonthlyPMI = 0;
if (requiredDownPaymentPercentage 0) {
var pmiLoanAmount = maxLoanAmountWithoutPMI; // PMI is typically on the loan amount
actualMonthlyPMI = (pmiLoanAmount * (pmiRate / 100)) / 12;
// Re-calculate monthly P&I if PMI is a factor
monthlyPrincipalAndInterest = maxAffordablePITI – monthlyPropertyTaxes – monthlyHomeInsurance – actualMonthlyPMI;
if (monthlyPrincipalAndInterest 0) {
finalMaxLoanAmount = monthlyPrincipalAndInterest * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
} else {
finalMaxLoanAmount = monthlyPrincipalAndInterest * numberOfPayments;
}
}
var maxAffordablePurchasePrice = finalMaxLoanAmount + downPayment;
resultDiv.innerHTML = `