Use this calculator to estimate how much you might be able to borrow for a mortgage based on your income, debts, and down payment.
Understanding Mortgage Affordability
Securing a mortgage is a significant step towards homeownership. However, before you fall in love with a dream home, it's crucial to understand how much you can realistically afford to borrow. Mortgage affordability isn't just about the lender's willingness to lend; it's about your ability to comfortably manage the monthly payments over the life of the loan without straining your finances.
Several key factors influence how much mortgage you can qualify for and afford. Lenders typically use debt-to-income (DTI) ratios, along with your credit score, down payment, and the loan terms themselves.
Key Factors:
Gross Annual Income: This is your total income before taxes and other deductions. Lenders often look at how much of your income would go towards housing expenses (principal, interest, taxes, and insurance – PITI) and your total monthly debt obligations. A common guideline is that your PITI should not exceed 28% of your gross monthly income, and your total debt (PITI + other debts) should not exceed 36% to 43% of your gross monthly income, though this can vary by lender and loan type.
Total Monthly Debt Payments: This includes all recurring monthly obligations like credit card payments, car loans, student loans, and personal loans. These debts reduce the amount of money available for a mortgage payment.
Down Payment: A larger down payment reduces the loan amount needed, lowers your loan-to-value (LTV) ratio, and can potentially lead to better interest rates and lower private mortgage insurance (PMI) costs.
Interest Rate: The interest rate significantly impacts your monthly payment and the total interest paid over the life of the loan. Even a small difference in the interest rate can lead to substantial differences in affordability.
Loan Term: Shorter loan terms (e.g., 15 years) result in higher monthly payments but less total interest paid. Longer loan terms (e.g., 30 years) mean lower monthly payments but more total interest paid.
Our Mortgage Affordability Calculator provides an estimated maximum loan amount you might be able to borrow. It considers your income, existing debts, and down payment to give you a clearer picture of your potential borrowing power. Remember, this is an estimate, and actual loan approvals depend on a lender's specific underwriting criteria, credit history, and a formal mortgage application. It's always recommended to speak with a mortgage professional for personalized advice.
Example Calculation:
Let's say you have an annual gross income of $90,000, with total monthly debt payments of $400. You have saved a down payment of $50,000. You are looking at a 30-year mortgage with an estimated interest rate of 6.8%.
Using our calculator with these figures, we can estimate your maximum affordable loan amount. The calculator will factor in the portion of your income available for housing and your existing debt load to present a realistic borrowing capacity. For instance, a lender might deem you capable of a loan amount that results in a monthly principal and interest payment of around $1,800-$2,000, depending on their specific DTI guidelines. This, combined with your down payment, would suggest a maximum home price you could potentially afford.
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);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// — Input Validation —
if (isNaN(annualIncome) || annualIncome <= 0) {
resultDiv.innerHTML = "Please enter a valid Annual Gross Income.";
return;
}
if (isNaN(monthlyDebt) || monthlyDebt < 0) { // Monthly debt can be 0
resultDiv.innerHTML = "Please enter a valid Total Monthly Debt Payments.";
return;
}
if (isNaN(downPayment) || downPayment < 0) { // Down payment can be 0
resultDiv.innerHTML = "Please enter a valid Down Payment Amount.";
return;
}
if (isNaN(interestRate) || interestRate 20) { // Realistic rate range
resultDiv.innerHTML = "Please enter a valid Estimated Mortgage Interest Rate (between 0.1% and 20%).";
return;
}
if (isNaN(loanTerm) || loanTerm 40) { // Realistic loan term range
resultDiv.innerHTML = "Please enter a valid Mortgage Loan Term (between 1 and 40 years).";
return;
}
// — Calculations —
// Assumptions:
// 1. Lender guidelines for maximum PITI (Principal, Interest, Taxes, Insurance) = 28% of gross monthly income.
// 2. Lender guidelines for maximum Total Debt (PITI + other debts) = 36% of gross monthly income.
// We will calculate affordability based on the more restrictive of these two.
var grossMonthlyIncome = annualIncome / 12;
var maxPITI_based_on_income = grossMonthlyIncome * 0.28;
var maxTotalDebt_allowable = grossMonthlyIncome * 0.36;
var maxPITI_based_on_total_debt = maxTotalDebt_allowable – monthlyDebt;
// Ensure max PITI is not negative if debts already exceed 36% income
if (maxPITI_based_on_total_debt < 0) {
maxPITI_based_on_total_debt = 0;
}
var maxMonthlyPITI = Math.min(maxPITI_based_on_income, maxPITI_based_on_total_debt);
// Estimate Taxes and Insurance (common assumptions, these vary greatly by location and property)
// Let's assume property taxes are 1.2% of home value annually, and homeowners insurance is 0.4% annually.
// This means ~1.6% of home value per year for taxes/insurance, or (1.6/12)% per month.
// Since we don't know the home value yet, we have to work backwards.
// A common approach is to assume a portion of the monthly PITI is for P&I.
// Let's assume T&I is roughly 20-30% of the PITI for estimation purposes.
// For simplicity in this calculator, we'll directly estimate the maximum P&I payment.
// A more complex calculator would iterate or make assumptions about property value to estimate T&I.
// For this simplified calculator, we'll assume the `maxMonthlyPITI` is the maximum
// that can be allocated to Principal & Interest (P&I) for calculation purposes.
// In reality, T&I are separate and property-dependent.
var maxMonthlyPI = maxMonthlyPITI; // Simplified: assume max PITI IS max P&I for loan amount calculation
if (maxMonthlyPI 0) {
var factor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanAmount = maxMonthlyPI * (factor – 1) / (monthlyInterestRate * factor);
} else { // Handle 0% interest rate scenario (highly unlikely for mortgages)
maxLoanAmount = maxMonthlyPI * numberOfPayments;
}
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
// — Display Results —
resultDiv.innerHTML =
"Estimated Maximum Monthly P&I Payment: $" + maxMonthlyPI.toFixed(2) + "" +
"Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Maximum Affordable Home Price (Loan + Down Payment): $" + estimatedMaxHomePrice.toFixed(2) + "" +
"Disclaimer: This is an estimation. Actual loan approval depends on lender's specific criteria, credit score, appraisal, and other factors.";
}