Understanding how much you can afford for a mortgage is a crucial first step in the home-buying process. This calculator helps you estimate your maximum affordable mortgage payment based on your income, debts, and desired down payment. Remember, this is an estimate, and lenders will consider many factors beyond these inputs.
Understanding Your Mortgage Affordability
When determining how much mortgage you can afford, lenders typically look at a few key ratios and factors. The most common are the Debt-to-Income (DTI) ratio. Lenders often have limits on these ratios, commonly around 28% for the front-end ratio (housing costs to gross income) and 36% for the back-end ratio (total debt to gross income).
This calculator provides an estimate based on general guidelines. It considers your annual income and existing monthly debt to determine the maximum monthly payment you might be approved for. It then uses the loan term, interest rate, and your down payment to estimate the loan amount you could support and, subsequently, a rough maximum home price.
Key Factors in Mortgage Affordability:
Income: Higher income generally means a larger borrowing capacity.
Existing Debts: Significant existing debts (car loans, student loans, credit cards) reduce the amount of mortgage payment you can afford.
Down Payment: A larger down payment reduces the loan amount needed, making a higher-priced home more affordable.
Interest Rate: A lower interest rate means lower monthly payments for the same loan amount, increasing affordability.
Loan Term: Longer loan terms result in lower monthly payments but more interest paid over time.
Credit Score: While not directly included in this simplified calculator, your credit score significantly impacts the interest rate you'll qualify for and overall loan approval.
Property Taxes and Homeowner's Insurance: These are critical components of your monthly housing payment (often called PITI – Principal, Interest, Taxes, and Insurance) and are not explicitly calculated here but are factored into lender assessments.
It's essential to consult with a mortgage lender or financial advisor for a precise determination of your borrowing power and to discuss all the nuances of your financial situation.
function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var homePrice = parseFloat(document.getElementById("homePrice").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
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(homePrice) || homePrice <= 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// — Affordability Calculation Logic —
// Guideline: Max DTI of 36% (total debt) and 28% (housing costs)
// We'll use the more restrictive of the two based on income.
var maxTotalMonthlyPaymentAllowed = annualIncome * 0.36 / 12;
var maxHousingPaymentAllowed = annualIncome * 0.28 / 12;
// Maximum monthly payment considering existing debts
var maxMortgagePaymentBasedOnDTI = maxTotalMonthlyPaymentAllowed – monthlyDebt;
// Ensure the housing payment doesn't exceed the general housing guideline
var affordableMonthlyPayment = Math.min(maxMortgagePaymentBasedOnDTI, maxHousingPaymentAllowed);
if (affordableMonthlyPayment 0) {
maxLoanAmount = affordableMonthlyPayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else { // Handle 0% interest rate case
maxLoanAmount = affordableMonthlyPayment * numberOfPayments;
}
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
// — Display Results —
var htmlOutput = "