Mortgage Affordability Calculator
This calculator helps you estimate how much you can afford to borrow for a mortgage based on your income, debts, and desired monthly payment.
Your Estimated Mortgage Affordability
Error: Please enter valid positive numbers for all fields.
"; return; } // 1. Calculate maximum total monthly debt payment allowed (based on DTI) var maxTotalMonthlyDebt = grossMonthlyIncome * maxDTI; // 2. Calculate maximum monthly mortgage payment allowed var maxMonthlyMortgagePayment = maxTotalMonthlyDebt – existingMonthlyDebt; // Ensure maxMonthlyMortgagePayment is not negative if (maxMonthlyMortgagePayment 0) { // P = M [1 – (1 + r)^-n] / r (where P is Principal loan amount, M is monthly payment, r is monthly interest rate, n is number of payments) maxLoanAmount = maxMonthlyMortgagePayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate; } else { // If interest rate is 0, the loan amount is simply monthly payment * number of payments maxLoanAmount = maxMonthlyMortgagePayment * numberOfPayments; } // Ensure maxLoanAmount is not NaN or negative (though should be handled by checks above) if (isNaN(maxLoanAmount) || maxLoanAmount < 0) { maxLoanAmount = 0; } // 4. Calculate estimated maximum home price var estimatedMaxHomePrice = maxLoanAmount + downPayment; // Display Results mortgageAmountDiv.innerHTML = "Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2); maxMonthlyPaymentDiv.innerHTML = "Maximum Recommended Monthly Mortgage Payment (Principal & Interest): $" + maxMonthlyMortgagePayment.toFixed(2); estimatedHomePriceDiv.innerHTML = "Estimated Maximum Home Price (including down payment): $" + estimatedMaxHomePrice.toFixed(2); // Informative notes for the user if (maxMonthlyMortgagePayment === 0) { resultsDiv.innerHTML += "Based on your inputs, your existing debts consume your maximum allowable debt-to-income ratio. You may not be able to afford a new mortgage payment at this time."; } resultsDiv.innerHTML += "Disclaimer: This is an estimate. Actual loan approval depends on lender policies, credit score, property taxes, homeowners insurance, and other factors."; }Understanding Mortgage Affordability
Purchasing a home is a significant financial decision, and understanding how much mortgage you can afford is a crucial first step. The Mortgage Affordability Calculator helps you estimate your borrowing potential by considering several key financial factors. It's designed to give you a realistic idea of the loan amount you might qualify for, which in turn helps you determine the price range of homes you should be looking at.
Key Factors in Mortgage Affordability:
- Gross Monthly Income: This is your total income before taxes and other deductions. Lenders use this as the primary indicator of your ability to repay a loan.
- Existing Monthly Debt Payments: This includes recurring payments for things like car loans, student loans, personal loans, and credit card minimum payments. These debts reduce the amount of income available for a mortgage payment.
- Down Payment: The upfront cash you pay towards the home purchase. A larger down payment reduces the loan amount needed and can sometimes lead to better loan terms.
- Debt-to-Income Ratio (DTI): This is a percentage that compares your total monthly debt payments to your gross monthly income. Lenders often have maximum DTI limits (commonly between 36% and 43%) that a borrower cannot exceed. A lower DTI generally indicates a stronger borrower. Our calculator uses this to determine how much of your income can be allocated to housing costs.
- Interest Rate: The annual interest rate on the mortgage. Higher interest rates mean higher monthly payments for the same loan amount, thus reducing affordability.
- Loan Term (Years): The length of time over which you'll repay the mortgage (e.g., 15, 20, or 30 years). Shorter terms usually have higher monthly payments but result in less interest paid over the life of the loan.
How the Calculator Works:
- Maximum Debt Allowed: The calculator first determines the maximum total monthly debt payments you can have by multiplying your Gross Monthly Income by your Maximum Debt-to-Income Ratio.
- Maximum Mortgage Payment: It then subtracts your Existing Monthly Debt Payments from the maximum total debt allowed. The result is the maximum amount you can afford to pay towards your monthly mortgage (principal and interest).
- Maximum Loan Amount: Using a standard mortgage payment formula (which factors in the Maximum Monthly Mortgage Payment, Interest Rate, and Loan Term), the calculator estimates the largest loan you could qualify for.
- Estimated Home Price: Finally, it adds your Down Payment to the calculated Maximum Loan Amount to provide an estimate of the maximum home price you might be able to afford.
Example:
Let's say you have:
- Gross Monthly Income: $7,000
- Existing Monthly Debt Payments: $600
- Down Payment: $30,000
- Maximum Debt-to-Income Ratio: 40%
- Estimated Annual Interest Rate: 6.5%
- Loan Term: 30 Years
Using the calculator:
- Maximum Total Monthly Debt Allowed = $7,000 * 0.40 = $2,800
- Maximum Monthly Mortgage Payment = $2,800 – $600 = $2,200
- Estimated Maximum Loan Amount ≈ $347,750 (based on $2,200 monthly payment, 6.5% interest, 30 years)
- Estimated Maximum Home Price ≈ $347,750 + $30,000 = $377,750
This example suggests you might be able to afford a home priced around $377,750, with a mortgage loan of approximately $347,750.
Important Note: This calculator provides an estimate for your principal and interest payments only. It does not include other costs associated with homeownership, such as property taxes, homeowners insurance, private mortgage insurance (PMI), or potential homeowners association (HOA) fees. These additional costs will increase your total monthly housing expense and should be factored into your budget.