Determining how much house you can afford is a crucial step in the home-buying process. The Mortgage Affordability Calculator is designed to give you an estimated maximum loan amount you might qualify for, based on your financial situation and current market conditions. This calculation is a guideline and not a pre-approval from a lender. Lenders consider many factors beyond this basic calculation, including your credit score, employment history, and debt-to-income ratio.
Key Factors in Mortgage Affordability:
Annual Household Income: This is the primary driver of your borrowing capacity. Higher income generally means you can afford a larger loan.
Monthly Debt Payments: Lenders look at your existing financial obligations. These include car loans, student loans, credit card payments, and any other recurring debts. The higher these are, the less income is available for a mortgage.
Down Payment: A larger down payment reduces the loan amount you need, which can make a property more affordable and may help you secure better loan terms.
Interest Rate: This is the cost of borrowing money. Even small changes in interest rates can significantly impact your monthly payments and the total interest paid over the life of the loan.
Loan Term: This is the length of time you have to repay the loan, typically 15 or 30 years. A shorter term usually means higher monthly payments but less interest paid overall.
How the Calculator Works:
This calculator estimates your maximum affordable monthly mortgage payment by considering your income and existing debts. It then uses common lending guidelines, such as the 28/36 rule (where your total housing costs shouldn't exceed 28% of your gross monthly income, and your total debt payments, including the mortgage, shouldn't exceed 36%), and typical loan-to-value ratios. It then calculates the maximum loan amount you could support with that monthly payment, factoring in the interest rate and loan term you provide.
Example:
Let's say your Annual Household Income is $100,000. Your Total Monthly Debt Payments (car loan, student loan) are $800. You have a Down Payment of $50,000. The Estimated Annual Interest Rate is 6.5%, and you're considering a Loan Term of 30 years.
Based on these figures, the calculator will estimate the maximum loan amount you might be able to afford, helping you understand your potential purchasing power.
function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").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
if (isNaN(annualIncome) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (annualIncome <= 0 || monthlyDebtPayments < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter positive values for income, interest rate, and loan term, and non-negative values for debts and down payment.";
return;
}
// Calculate Gross Monthly Income
var grossMonthlyIncome = annualIncome / 12;
// Guideline: Max PITI (Principal, Interest, Taxes, Insurance) is ~28% of gross monthly income
// We'll use a slightly more conservative approach and focus on max P&I for affordability calculation,
// assuming taxes and insurance will be factored in by the lender based on property.
// A common debt-to-income guideline is 36% for total debt.
var maxTotalDebtPayment = grossMonthlyIncome * 0.36;
var maxMortgagePIMonthly = maxTotalDebtPayment – monthlyDebtPayments;
if (maxMortgagePIMonthly <= 0) {
resultDiv.innerHTML = "Based on your income and existing debt, it may be challenging to qualify for an additional mortgage. Lenders typically look at a debt-to-income ratio. Your current debts are high relative to your income.";
return;
}
// Calculate maximum loan amount based on max monthly P&I payment
// Formula for monthly mortgage payment: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where:
// M = Monthly payment
// P = Principal loan amount (what we want to find)
// i = Monthly interest rate (annualRate / 12)
// n = Total number of payments (loanTerm * 12)
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// Rearrange formula to solve for P: P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var maxLoanAmount = maxMortgagePIMonthly * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
// Calculate estimated total home price affordability
var estimatedHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML =
"
Estimated Affordability:
" +
"Maximum Monthly P&I Payment You Might Afford: $" + maxMortgagePIMonthly.toFixed(2) + "" +
"Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Maximum Home Purchase Price (including down payment): $" + estimatedHomePrice.toFixed(2) + "" +
"Disclaimer: This is an estimate. Actual loan amounts and affordability depend on lender approval, credit score, property taxes, homeowner's insurance, and other factors.";
}