Mortgage Rate Calculator Texas

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Mortgage Affordability Calculator

Understanding how much mortgage you can afford is a crucial first step in the home-buying process. This calculator helps you estimate your maximum affordable mortgage based on your income, debts, and a few other key financial factors. Remember, this is an estimate, and your actual borrowing capacity may vary based on lender criteria and your full financial profile.

How Mortgage Affordability is Calculated

Lenders typically use debt-to-income ratios (DTI) to assess your ability to repay a loan. There are generally two types of DTI ratios they consider:

  • Front-end DTI (Housing Ratio): This ratio compares your potential total housing expenses (principal, interest, taxes, and insurance – PITI) to your gross monthly income. A common guideline is that PITI should not exceed 28% of your gross monthly income.
  • Back-end DTI (Total Debt Ratio): This ratio compares your total monthly debt obligations (including PITI and all other recurring debts like car loans, student loans, and credit card minimum payments) to your gross monthly income. Lenders often prefer this ratio to be below 36%, though it can sometimes be higher depending on other factors like credit score and loan type.

This calculator primarily focuses on the back-end DTI by estimating your maximum affordable mortgage payment, considering your existing debts. It works backward from your income and debt limitations to determine how much you might be able to borrow.

Key Assumptions:

  • The calculator estimates your maximum affordable monthly mortgage payment (principal and interest only) based on the common back-end DTI limit of 36% of your gross monthly income, after deducting your existing monthly debts.
  • It assumes taxes and insurance will be an additional cost on top of your P&I payment.
  • The loan term and interest rate significantly impact the principal and interest (P&I) payment.

Example Calculation:

Let's say your Gross Monthly Income is $6,000, your existing Monthly Debt Payments are $600, your Down Payment is $30,000, the estimated Annual Interest Rate is 6%, and the Loan Term is 30 years.

  1. Maximum Allowable Total Debt: $6,000 (Gross Income) * 0.36 (Max DTI) = $2,160
  2. Maximum Affordable P&I Payment: $2,160 (Max Debt) – $600 (Existing Debts) = $1,560
  3. Loan Amount Calculation: Using a mortgage payment formula (or an online mortgage calculator), a P&I payment of $1,560 per month for 30 years at 6% annual interest supports a loan amount of approximately $260,760.
  4. Estimated Maximum Home Price: $260,760 (Loan Amount) + $30,000 (Down Payment) = $290,760

Therefore, in this example, you might be able to afford a home priced around $290,760, assuming PITI does not exceed your housing ratio limit and all other lender criteria are met.

function calculateMortgageAffordability() { var grossMonthlyIncome = parseFloat(document.getElementById("grossMonthlyIncome").value); var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value); var downPayment = parseFloat(document.getElementById("downPayment").value); var interestRate = parseFloat(document.getElementById("interestRate").value) / 100; var loanTermYears = parseFloat(document.getElementById("loanTermYears").value); var resultDiv = document.getElementById("result"); if (isNaN(grossMonthlyIncome) || grossMonthlyIncome <= 0 || isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0 || isNaN(downPayment) || downPayment < 0 || isNaN(interestRate) || interestRate <= 0 || isNaN(loanTermYears) || loanTermYears <= 0) { resultDiv.innerHTML = "Please enter valid positive numbers for all fields."; return; } var maxDtiRatio = 0.36; // Commonly used back-end DTI limit var maxTotalDebt = grossMonthlyIncome * maxDtiRatio; var maxMonthlyMortgagePayment = maxTotalDebt – monthlyDebtPayments; if (maxMonthlyMortgagePayment 0) { // Formula for present value of an annuity: PV = PMT * [1 – (1 + r)^-n] / r maxLoanAmount = maxMonthlyMortgagePayment * (1 – Math.pow(1 + monthlyInterestRate, -loanTermMonths)) / monthlyInterestRate; } else { // If interest rate is 0, loan amount is simply payment * term maxLoanAmount = maxMonthlyMortgagePayment * loanTermMonths; } var estimatedMaxHomePrice = maxLoanAmount + downPayment; // Format the results var formattedMaxMortgagePayment = maxMonthlyMortgagePayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' }); var formattedMaxLoanAmount = maxLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' }); var formattedMaxHomePrice = estimatedMaxHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' }); resultDiv.innerHTML = "Estimated Maximum Affordable Monthly P&I Payment: " + formattedMaxMortgagePayment + "" + "Estimated Maximum Loan Amount: " + formattedMaxLoanAmount + "" + "Estimated Maximum Home Price (including down payment): " + formattedMaxHomePrice + "" + "Note: This estimate does not include property taxes, homeowner's insurance, or potential Private Mortgage Insurance (PMI)."; }

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