Use this calculator to estimate the maximum mortgage you can afford based on your income, debts, and desired down payment. Understanding your borrowing capacity is a crucial first step in the home-buying process.
Understanding Mortgage Affordability
Buying a home is one of the biggest financial decisions you'll make. Before you start browsing listings, it's essential to determine how much you can realistically afford to borrow. The Mortgage Affordability Calculator helps you estimate this by considering several key factors:
Key Factors in Mortgage Affordability:
Annual Gross Income: This is your income before taxes and other deductions. Lenders primarily use this figure to assess your ability to repay a loan.
Total Monthly Debt Payments: This includes all your existing monthly financial obligations, such as car loans, student loans, credit card minimum payments, and personal loans. It does NOT include your current rent or the proposed mortgage payment.
Down Payment Amount: The upfront cash you pay towards the home purchase. A larger down payment reduces the loan amount needed and can influence interest rates.
Estimated Mortgage Interest Rate: The annual interest rate you expect to pay on the mortgage. This significantly impacts your monthly payment and the total cost of the loan over time.
Mortgage Loan Term: The duration of the loan, typically 15, 20, or 30 years. Shorter terms mean higher monthly payments but less interest paid overall.
Maximum Debt-to-Income Ratio (DTI): This is a crucial metric lenders use. It's calculated by dividing your total monthly debt payments (including the proposed mortgage) by your gross monthly income. Many lenders prefer a DTI of 43% or lower, though this can vary.
How the Calculator Works:
Our calculator takes your inputs and applies standard lending guidelines. It first determines your maximum allowable monthly debt payment based on your income and the specified DTI ratio. Then, it subtracts your existing monthly debt obligations to find the maximum amount you can allocate to a new mortgage payment. Finally, using a mortgage payment formula, it estimates the maximum loan amount you can take on with that monthly payment, considering the interest rate and loan term. This gives you an estimate of the home price you might afford, after accounting for your down payment.
Example:
Let's say Sarah has an annual gross income of $80,000 and total monthly debt payments of $500 (for her car loan). She has saved a $20,000 down payment. She's looking at a 30-year mortgage with an estimated interest rate of 6.5% and wants to keep her total DTI at or below 43%.
Gross Monthly Income: $80,000 / 12 = $6,666.67
Maximum Total Monthly Debt (43% DTI): $6,666.67 * 0.43 = $2,866.67
Maximum Mortgage Payment: $2,866.67 – $500 (existing debt) = $2,366.67
Using a mortgage calculation for a $2,366.67 monthly payment, 6.5% interest, and 30 years, the maximum loan amount Sarah can afford is approximately $374,000.
This means Sarah can likely afford a home priced around $394,000. Remember, this is an estimate, and actual loan approval depends on lender-specific criteria, credit scores, and a full financial assessment.
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 maxDTI = parseFloat(document.getElementById("maxDTI").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(maxDTI)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (annualIncome <= 0 || monthlyDebt < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0 || maxDTI 100) {
resultDiv.innerHTML = "Please enter positive values for income, term, and DTI. Down payment and debt can be zero but not negative. DTI must be between 0 and 100.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxTotalMonthlyDebt = grossMonthlyIncome * (maxDTI / 100);
var maxMortgagePayment = maxTotalMonthlyDebt – monthlyDebt;
if (maxMortgagePayment 0) {
maxLoanAmount = maxMortgagePayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else { // Handle 0% interest rate case, though uncommon for mortgages
maxLoanAmount = maxMortgagePayment * numberOfPayments;
}
var affordableHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML = "