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);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var propertyTaxesPercentage = parseFloat(document.getElementById("propertyTaxes").value);
var homeInsurance = parseFloat(document.getElementById("homeInsurance").value);
var pmiRatePercentage = parseFloat(document.getElementById("pmiRate").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Basic validation
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(propertyTaxesPercentage) || isNaN(homeInsurance) || isNaN(pmiRatePercentage)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
// Lender Debt-to-Income (DTI) Ratios (common benchmarks)
// Front-end DTI (Housing Expenses / Gross Income) – often around 28%
// Back-end DTI (Total Debt / Gross Income) – often around 36%
var maxFrontEndDTI = 0.28;
var maxBackEndDTI = 0.36;
var monthlyGrossIncome = annualIncome / 12;
var maxTotalMonthlyDebtPayment = monthlyGrossIncome * maxBackEndDTI;
var maxHousingPayment = monthlyGrossIncome * maxFrontEndDTI;
// Calculate maximum allowable monthly housing payment (PITI + PMI)
// We'll work backwards from the max total debt to find the max mortgage payment
var maxAllowedMortgagePayment = maxTotalMonthlyDebtPayment – monthlyDebt;
// Ensure the max allowed mortgage payment doesn't exceed the front-end DTI limit
if (maxAllowedMortgagePayment > maxHousingPayment) {
maxAllowedMortgagePayment = maxHousingPayment;
}
// We need to find the maximum loan amount that results in a monthly PITI + PMI payment
// that is less than or equal to maxAllowedMortgagePayment. This is complex and iterative.
// A simpler approach is to estimate maximum home price.
// Let's assume we want to find the maximum *home price* the user can afford.
// The monthly housing cost consists of:
// Principal & Interest (P&I) + Property Taxes + Home Insurance + PMI
// Iterative approach to find the maximum affordable loan amount and then home price
var maxLoanAmount = 0;
var increment = 1000; // Start with a reasonable increment for searching loan amount
var maxPossibleLoan = annualIncome * 5; // A very rough upper bound
for (var loan = 0; loan 0) {
principalAndInterest = loan * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfMonths)) / (Math.pow(1 + monthlyInterestRate, numberOfMonths) – 1);
} else {
principalAndInterest = loan / numberOfMonths; // Simple division if interest rate is 0
}
var annualPropertyTaxes = (loan + downPayment) * (propertyTaxesPercentage / 100); // Property tax is usually on the home price
var monthlyPropertyTaxes = annualPropertyTaxes / 12;
var monthlyHomeInsurance = homeInsurance / 12;
var monthlyPMI = loan * (pmiRatePercentage / 100) / 12;
var totalMonthlyHousingCost = principalAndInterest + monthlyPropertyTaxes + monthlyHomeInsurance + monthlyPMI;
if (totalMonthlyHousingCost <= maxAllowedMortgagePayment) {
maxLoanAmount = loan;
} else {
// We've exceeded the maximum allowable payment, so the previous loan amount was the max
break;
}
}
var maxHomePrice = maxLoanAmount + downPayment;
// Final check to ensure the calculated maxHomePrice is reasonable and doesn't lead to invalid numbers
if (maxHomePrice < downPayment || isNaN(maxHomePrice) || !isFinite(maxHomePrice)) {
resultDiv.innerHTML = "Could not determine affordability with the provided inputs. Please check your numbers.";
return;
}
// Display Results
var formattedMaxHomePrice = maxHomePrice.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
var formattedMaxAllowedMortgagePayment = maxAllowedMortgagePayment.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = `
Estimated Affordability:
Based on a ${maxFrontEndDTI * 100}% front-end DTI limit and a ${maxBackEndDTI * 100}% back-end DTI limit:
Maximum Monthly Housing Payment (PITI + PMI): ${formattedMaxAllowedMortgagePayment}
Maximum Loan Amount: ${formattedMaxLoanAmount}
Estimated Maximum Home Price You Can Afford: ${formattedMaxHomePrice}
Determining how much house you can afford is a crucial step in the home-buying process. It's not just about the mortgage payment itself, but a complex interplay of your income, existing debts, and the various costs associated with homeownership. A mortgage affordability calculator helps you estimate the maximum home price you can realistically purchase based on common lending guidelines.
Key Factors Influencing Affordability:
Annual Gross Income: This is your total income before taxes and deductions. Lenders use this as the primary indicator of your ability to repay a loan.
Total Monthly Debt Payments: This includes all recurring monthly debt obligations such as car loans, student loans, personal loans, and minimum credit card payments. It *excludes* your potential new mortgage payment.
Down Payment: The amount of cash you're putting towards the purchase price upfront. A larger down payment reduces the loan amount needed and can improve your chances of approval and loan terms.
Interest Rate: The annual interest rate on the mortgage significantly impacts your monthly principal and interest (P&I) payment. Higher rates mean higher payments for the same loan amount.
Loan Term: The duration of the mortgage (e.g., 15, 30 years). Shorter terms have higher monthly payments but result in less interest paid over time.
Property Taxes: These are local taxes levied on your property. They are typically paid monthly as part of your mortgage payment (escrowed). The percentage is usually based on the home's assessed value.
Homeowner's Insurance: This protects against damage to your home. It's also commonly escrowed and paid monthly with your mortgage.
Private Mortgage Insurance (PMI): If your down payment is less than 20% of the home's price, lenders usually require PMI to protect them against default. This is an additional monthly cost. The rate is typically a percentage of the loan amount.
How Lenders Assess Affordability: Debt-to-Income Ratios (DTI)
Lenders primarily use two Debt-to-Income (DTI) ratios to assess your affordability:
Front-End DTI (Housing Ratio): This ratio compares your estimated total monthly housing costs (Principal, Interest, Taxes, Insurance, and PMI – often called PITI + PMI) to your gross monthly income. A common benchmark is around 28%.
Back-End DTI (Total Debt Ratio): This ratio compares all of your recurring monthly debt payments (including the estimated PITI + PMI) to your gross monthly income. A common benchmark is around 36%.
Our calculator uses these DTI ratios to estimate the maximum monthly housing payment you might qualify for, and then works backward to estimate the maximum loan amount and, consequently, the maximum home price you can afford.
Using the Mortgage Affordability Calculator:
Enter your specific financial details into the fields provided. The calculator will then provide an estimated maximum home price you can afford. Remember, this is a guideline. Your actual borrowing capacity will be determined by a mortgage lender after a full review of your financial situation, credit history, and the specific loan product you choose.
Example:
Let's say you have an Annual Gross Income of $90,000. Your Total Monthly Debt Payments (car, student loans, etc.) are $500. You plan to make a Down Payment of $40,000. You're looking at an Estimated Annual Interest Rate of 6.5% for a 30-year Loan Term. You estimate Property Taxes at 1.2% of the home price annually, Homeowner's Insurance at $1,200 annually, and PMI at 0.5% of the loan amount annually (since your down payment is less than 20%).
With these inputs, the calculator would estimate your maximum monthly housing payment based on DTI ratios and then determine the maximum loan amount and estimated home price you could potentially afford. For instance, it might suggest a maximum home price around $350,000 (this is an illustrative number, actual calculation may vary).
Always consult with a mortgage professional for personalized advice and accurate loan pre-approval.