Mortgage Affordability Calculator
Use this calculator to estimate the maximum mortgage you can afford based on your income, debts, and estimated housing expenses.
Understanding Mortgage Affordability
Determining how much house you can afford is a crucial step in the home-buying process. This calculator helps you estimate your maximum affordable mortgage based on several key financial factors. It takes into account your income, existing debts, and the estimated costs associated with homeownership.
Key Factors Explained:
- Annual Gross Income: This is your total income before taxes and other deductions. Lenders use this as a primary measure of your ability to repay a loan.
- Monthly Debt Payments: This includes payments for other loans like car loans, student loans, and credit card minimum payments. Reducing these can increase your borrowing power.
- Down Payment: The upfront cash you pay towards the purchase price. A larger down payment reduces the loan amount needed and can improve your loan terms.
- Estimated Monthly Property Tax & Home Insurance: These are ongoing costs of homeownership that lenders typically include in your monthly housing payment (PITI – Principal, Interest, Taxes, and Insurance).
- Estimated Annual Interest Rate: The interest rate you expect to pay on the mortgage. Higher rates mean higher monthly payments for the same loan amount.
- Loan Term (Years): The length of time you have to repay the mortgage. Shorter terms usually have higher monthly payments but less interest paid overall.
How the Calculator Works:
This calculator uses common lending guidelines to estimate affordability. Generally, lenders prefer your total debt-to-income (DTI) ratio to be below a certain threshold (often around 43%). It also considers the monthly payment you can afford, factoring in principal, interest, taxes, and insurance.
The calculation estimates the maximum loan amount you can qualify for by considering your available income after covering debts and estimated housing expenses, within a typical loan structure.
Important Disclaimer:
This calculator provides an estimate only and should not be considered a loan approval or a guarantee of financing. Your actual mortgage affordability may vary depending on the lender, your credit score, current market conditions, and other underwriting factors.
var calculateMortgageAffordability = function() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var estimatedMonthlyPropertyTax = parseFloat(document.getElementById("estimatedMonthlyPropertyTax").value);
var estimatedMonthlyHomeInsurance = parseFloat(document.getElementById("estimatedMonthlyHomeInsurance").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
// Input validation
if (isNaN(annualIncome) || annualIncome < 0 ||
isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(estimatedMonthlyPropertyTax) || estimatedMonthlyPropertyTax < 0 ||
isNaN(estimatedMonthlyHomeInsurance) || estimatedMonthlyHomeInsurance < 0 ||
isNaN(interestRate) || interestRate 100 ||
isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var monthlyIncome = annualIncome / 12;
var maxTotalHousingPayment = monthlyIncome * 0.43 – monthlyDebtPayments; // Rough DTI of 43% for total housing
if (maxTotalHousingPayment <= 0) {
resultDiv.innerHTML = "Based on your income and debts, it appears you may not qualify for a mortgage at this time. Please consult a mortgage professional.";
return;
}
var monthlyPITI = maxTotalHousingPayment – estimatedMonthlyPropertyTax – estimatedMonthlyHomeInsurance;
if (monthlyPITI <= 0) {
resultDiv.innerHTML = "Your estimated property taxes and home insurance alone exceed your affordable housing payment. Please consider a less expensive property or increasing your income/down payment.";
return;
}
// Calculate maximum loan amount based on P&I payment
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// Using the loan payment formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Rearranged to solve for P (Principal/Loan Amount): P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var maxLoanAmount = monthlyPITI * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
if (isNaN(maxLoanAmount) || maxLoanAmount <= 0) {
resultDiv.innerHTML = "Could not calculate maximum loan amount with the given inputs. Please check your interest rate and loan term.";
return;
}
var affordableHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML = "
Your Estimated Mortgage Affordability:
" +
"
Maximum Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"
Estimated Affordable Home Price: $" + affordableHomePrice.toFixed(2) + "";
};