How is the Interest Rate on a Payday Loan Calculated
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Mortgage Affordability Calculator
Use this calculator to estimate how much house you can afford based on your income, debts, and down payment. Understanding your potential mortgage affordability is a crucial first step in the home-buying process.
Understanding Mortgage Affordability
Determining how much house you can afford involves several factors beyond just your income. Lenders typically look at two main ratios: the front-end ratio (housing costs) and the back-end ratio (total debt obligations).
Housing Costs (PITI): This includes your Principal and Interest payment (determined by loan amount, interest rate, and term), Property Taxes, Homeowner's Insurance, and Private Mortgage Insurance (PMI) if your down payment is less than 20%. Generally, lenders prefer your total monthly housing costs to be no more than 28% of your gross monthly income.
Total Debt Obligations: This includes your PITI plus all other monthly debt payments, such as car loans, student loans, and credit card minimum payments. Lenders typically want this to be no more than 36% of your gross monthly income. However, some loan programs may allow for higher ratios.
This calculator provides an estimate by working backward. It considers lender guidelines for debt-to-income ratios to suggest a maximum affordable monthly mortgage payment, and then estimates the maximum loan amount you could qualify for, factoring in your down payment. Remember, this is an estimate, and your actual borrowing capacity will be determined by a mortgage lender after a full review 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 interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var propertyTaxes = parseFloat(document.getElementById("propertyTaxes").value);
var homeInsurance = parseFloat(document.getElementById("homeInsurance").value);
var pmi = parseFloat(document.getElementById("pmi").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = "; // Clear previous results
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate < 0 ||
isNaN(loanTerm) || loanTerm <= 0 ||
isNaN(propertyTaxes) || propertyTaxes < 0 ||
isNaN(homeInsurance) || homeInsurance < 0 ||
isNaN(pmi) || pmi < 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Standard DTI ratios (can vary by lender)
var maxFrontEndRatio = 0.28; // 28% of gross monthly income for PITI
var maxBackEndRatio = 0.36; // 36% of gross monthly income for PITI + other debts
var grossMonthlyIncome = annualIncome / 12;
// Calculate maximum allowable total monthly housing costs (PITI) based on front-end ratio
var maxPITI_frontEnd = grossMonthlyIncome * maxFrontEndRatio;
// Calculate maximum allowable total debt payments based on back-end ratio
var maxTotalDebtPayments = grossMonthlyIncome * maxBackEndRatio;
// Calculate maximum allowable PITI based on back-end ratio
var maxPITI_backEnd = maxTotalDebtPayments – monthlyDebt;
// The most restrictive PITI limit determines the maximum affordable PITI
var maxAffordablePITI = Math.min(maxPITI_frontEnd, maxPITI_backEnd);
if (maxAffordablePITI <= 0) {
resultDiv.innerHTML = "Based on your income and existing debts, it may be difficult to qualify for a mortgage under standard debt-to-income ratios. It's recommended to reduce debt or increase income.";
return;
}
var annualPropertyTaxes = propertyTaxes;
var annualHomeInsurance = homeInsurance;
var annualPmi = pmi;
var monthlyPropertyTaxes = annualPropertyTaxes / 12;
var monthlyHomeInsurance = annualHomeInsurance / 12;
var monthlyPmi = annualPmi / 12;
var maxMonthlyMortgagePayment = maxAffordablePITI – monthlyPropertyTaxes – monthlyHomeInsurance – monthlyPmi;
if (maxMonthlyMortgagePayment 0 && numberOfMonths > 0) {
var factor = Math.pow(1 + monthlyInterestRate, numberOfMonths);
maxLoanAmount = maxMonthlyMortgagePayment * (factor – 1) / (monthlyInterestRate * factor);
} else if (monthlyInterestRate === 0 && numberOfMonths > 0) {
// Handle zero interest rate case
maxLoanAmount = maxMonthlyMortgagePayment * numberOfMonths;
}
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML = `
Estimated Affordability:
Maximum Affordable Monthly PITI: $${maxAffordablePITI.toFixed(2)}
Estimated Maximum Monthly Mortgage Payment (Principal & Interest): $${maxMonthlyMortgagePayment.toFixed(2)}
Estimated Maximum Loan Amount: $${maxLoanAmount.toFixed(2)}
Estimated Maximum Home Price You Can Afford: $${estimatedMaxHomePrice.toFixed(2)}
Note: This is an estimate. Actual loan approval depends on lender's full underwriting criteria, credit score, loan type, and market conditions.
`;
}