Use this calculator to estimate how much house you can afford based on your income, debts, and down payment. Understanding your borrowing power upfront can help you narrow your home search and negotiate effectively.
How Mortgage Affordability is Calculated
Lenders use a few key ratios to determine how much you can borrow. The two most common are the front-end ratio (housing ratio) and the back-end ratio (debt-to-income ratio).
Front-End Ratio (Housing Ratio):
This ratio looks at the percentage of your gross monthly income that would go towards your PITI payment (Principal, Interest, Taxes, and Insurance). A common guideline is that PITI should not exceed 28% of your gross monthly income.
Formula: (Estimated PITI Payment / Gross Monthly Income) * 100%
Back-End Ratio (Debt-to-Income Ratio or DTI):
This ratio compares your total monthly debt obligations (including the estimated mortgage payment, plus existing debts like car loans, student loans, and credit card minimums) to your gross monthly income. Lenders typically prefer this ratio to be no more than 36% to 43%, though some programs allow higher.
Formula: (Estimated PITI Payment + Total Monthly Debt Payments) / Gross Monthly Income * 100%
Maximum Loan Amount Estimation:
Our calculator estimates your maximum affordable home price by working backward. It generally assumes that your total monthly housing costs (PITI) should not exceed a certain percentage of your gross monthly income, and your total debt-to-income ratio should also remain within acceptable limits. The calculation also factors in your down payment.
The calculator estimates the maximum monthly mortgage payment you can afford based on these ratios and your provided inputs, then uses a mortgage payment formula to derive the maximum loan principal. The estimated home price is this loan principal plus your down payment.
Important Considerations:
This calculator provides an estimate. Your actual borrowing power may vary based on the specific lender, your credit score, current market conditions, and other financial factors.
Property taxes and homeowner's insurance costs can vary significantly by location and property type.
The interest rate used is an estimate. Locking in a lower rate can significantly increase your affordability.
Always consult with a mortgage professional for a personalized assessment.
function calculateAffordability() {
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) / 100;
var loanTerm = parseFloat(document.getElementById("loanTerm").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) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxPitiPercentage = 0.28; // Typical front-end ratio
var maxDtiPercentage = 0.36; // Typical back-end ratio
// Calculate maximum PITI payment based on front-end ratio
var maxPitiFromFrontEnd = grossMonthlyIncome * maxPitiPercentage;
// Calculate maximum total debt payment based on back-end ratio
var maxTotalDebtFromBackEnd = grossMonthlyIncome * maxDtiPercentage;
// The actual maximum PITI is the lower of what the front-end ratio allows,
// or what the back-end ratio allows after subtracting existing debts.
var maxPitiPayment = Math.min(maxPitiFromFrontEnd, maxTotalDebtFromBackEnd – monthlyDebt);
if (maxPitiPayment <= 0) {
resultDiv.innerHTML = "Based on your income and debts, you may not qualify for a mortgage at current rates. Consider increasing income, reducing debt, or increasing your down payment.";
return;
}
// Estimate taxes and insurance (these are rough estimates and can vary wildly)
// Let's assume 1.2% of home price for taxes and 0.4% for insurance annually.
// This is tricky because we don't know the home price yet. We'll make an iterative
// approach or a simplified assumption. For simplicity here, let's assume a ratio
// of PITI to Loan Principal. A common rule of thumb for monthly PITI (excluding P&I)
// is around 0.1% to 0.2% of the loan principal. Let's use 0.15% for estimation.
var estimatedMonthlyTaxesInsurance = maxPitiPayment * 0.15; // Rough estimate
// Monthly Principal & Interest (P&I) is max PITI minus estimated taxes/insurance
var maxMonthlyPI = maxPitiPayment – estimatedMonthlyTaxesInsurance;
if (maxMonthlyPI <= 0) {
resultDiv.innerHTML = "Based on estimated taxes and insurance, your affordable P&I payment is too low. You may need a larger down payment or a lower interest rate.";
return;
}
// Calculate maximum loan principal using the mortgage payment formula:
// M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where:
// M = Monthly Payment (maxMonthlyPI)
// P = Principal Loan Amount (what we want to find)
// i = monthly interest rate (interestRate / 12)
// n = total number of payments (loanTerm * 12)
var monthlyInterestRate = interestRate / 12;
var numberOfPayments = loanTerm * 12;
var numerator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
var denominator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
if (denominator === 0) { // Avoid division by zero if interest rate is 0
resultDiv.innerHTML = "Invalid interest rate provided.";
return;
}
var maxLoanPrincipal = maxMonthlyPI * (denominator / numerator);
var estimatedMaxHomePrice = maxLoanPrincipal + downPayment;
// Display results
var formattedMaxHomePrice = estimatedMaxHomePrice.toLocaleString(undefined, { minimumFractionDigits: 0, maximumFractionDigits: 0 });
var formattedMaxLoanPrincipal = maxLoanPrincipal.toLocaleString(undefined, { minimumFractionDigits: 0, maximumFractionDigits: 0 });
var formattedMaxPitiPayment = maxPitiPayment.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedGrossMonthlyIncome = grossMonthlyIncome.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedMonthlyDebt = monthlyDebt.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
resultDiv.innerHTML = "
Estimated Affordability:
" +
"Estimated Maximum Home Price: $" + formattedMaxHomePrice + "" +
"(This includes your down payment of $" + downPayment.toLocaleString(undefined, { minimumFractionDigits: 0, maximumFractionDigits: 0 }) + ")" +
"Estimated Maximum Loan Principal: $" + formattedMaxLoanPrincipal + "" +
"Estimated Maximum Monthly PITI Payment: $" + formattedMaxPitiPayment + "" +
"Gross Monthly Income: $" + formattedGrossMonthlyIncome + "" +
"Existing Monthly Debt Payments: $" + formattedMonthlyDebt + "" +
"Disclaimer: This is an estimate. Actual loan approval and amounts may vary. Consult a mortgage professional.";
}