Determining how much house you can afford is a crucial step in the home-buying process. While lenders will provide you with a pre-approval amount, it's wise to have your own understanding of your borrowing capacity. This Mortgage Affordability Calculator is designed to give you a realistic estimate of the maximum mortgage you might qualify for, considering your income, existing debts, down payment, and current interest rate environment.
Key Factors in Mortgage Affordability:
Annual Income: This is the primary driver of your borrowing power. Lenders assess your ability to repay the loan based on your earnings.
Monthly Debt Payments: Existing financial obligations, such as credit card payments, car loans, and student loans, reduce the amount of income available for a mortgage payment. These are often referred to as your Debt-to-Income (DTI) ratio.
Down Payment: A larger down payment reduces the loan amount needed, making the mortgage more affordable and potentially securing better interest rates. It also reduces your Loan-to-Value (LTV) ratio.
Interest Rate: Even small changes in the interest rate can significantly impact your monthly payment and the total interest paid over the life of the loan. Higher rates mean higher monthly payments for the same loan amount.
Loan Term: The length of the mortgage (e.g., 15, 20, or 30 years) affects your monthly payment. Shorter terms result in higher monthly payments but less interest paid overall, while longer terms have lower monthly payments but more interest paid over time.
How the Calculator Works:
This calculator uses common lending guidelines to estimate your affordability. It typically considers that your total monthly housing expenses (including principal, interest, property taxes, and homeowner's insurance – often referred to as PITI) should not exceed a certain percentage of your gross monthly income, and that your total debt obligations (including the estimated mortgage payment) should also not exceed a specific percentage. This calculator simplifies this by focusing on the core mortgage payment based on your inputs.
Disclaimer: This calculator provides an estimate only. Actual loan approval and amounts are determined by lenders based on their specific underwriting criteria, credit scores, and a full financial review.
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 resultElement = document.getElementById("result");
resultElement.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm)) {
resultElement.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (annualIncome <= 0 || monthlyDebt < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0) {
resultElement.innerHTML = "Please enter positive values for income, loan term, and interest rate, and non-negative values for debt and down payment.";
return;
}
// Common DTI ratios used by lenders
var maxHousingRatio = 0.28; // Example: 28% of gross monthly income for housing (PITI)
var maxTotalDebtRatio = 0.36; // Example: 36% of gross monthly income for all debts
var grossMonthlyIncome = annualIncome / 12;
// Maximum affordable monthly payment for housing (excluding taxes and insurance for this simplified calc)
var maxMortgagePayment = grossMonthlyIncome * maxHousingRatio;
// Maximum affordable total monthly debt payment
var maxTotalMonthlyDebt = grossMonthlyIncome * maxTotalDebtRatio;
// Maximum affordable principal and interest payment
var affordablePrincipalInterest = Math.min(maxMortgagePayment, maxTotalMonthlyDebt – monthlyDebt);
if (affordablePrincipalInterest 0) {
maxLoanAmount = affordablePrincipalInterest * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
// Handle case where interest rate is 0 (though unlikely for mortgages)
maxLoanAmount = affordablePrincipalInterest * numberOfPayments;
}
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
resultElement.innerHTML =
"Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Maximum Home Price (with down payment): $" + estimatedMaxHomePrice.toFixed(2) + "" +
"This estimation assumes your total monthly housing costs (principal, interest, taxes, insurance) are around " + (maxHousingRatio * 100) + "% of your gross monthly income, and your total debt obligations do not exceed " + (maxTotalDebtRatio * 100) + "%.";
}