Determining how much house you can afford is a crucial step in the home-buying process. A mortgage affordability calculator helps you estimate the maximum loan amount you might qualify for based on your financial situation and current market conditions. This tool is designed to give you a clearer picture of your potential borrowing power.
Key Factors in Mortgage Affordability:
Annual Household Income: This is the primary factor lenders consider. The higher your income, the more you can generally borrow.
Total Monthly Debt Payments: Lenders look at your existing recurring debts, such as car loans, student loans, and credit card minimum payments. These obligations reduce the amount of income available for a mortgage payment.
Down Payment: A larger down payment reduces the loan amount needed, which can increase affordability and potentially secure better loan terms.
Interest Rate: The annual interest rate significantly impacts your monthly payment and the total cost of the loan over its lifetime. Lower rates mean lower payments and greater affordability.
Loan Term: The length of the loan (e.g., 15, 20, or 30 years) affects the monthly payment. Shorter terms result in higher monthly payments but less interest paid overall. Longer terms mean lower monthly payments but more interest paid over time.
How the Calculator Works:
This calculator uses common lending guidelines to estimate your maximum affordable mortgage. A typical rule of thumb is that your total housing costs (including principal, interest, property taxes, and homeowner's insurance – often referred to as PITI) should not exceed 28% of your gross monthly income. Additionally, your total debt (including the proposed mortgage payment) should not exceed 36% of your gross monthly income. This calculator focuses on estimating the maximum loan amount based on these principles, considering your income, existing debts, down payment, interest rate, and loan term.
While this calculator provides a useful estimate, it's essential to remember that actual loan approval depends on a lender's specific underwriting criteria, credit score, employment history, and other financial factors. It's always recommended to speak with a mortgage professional for a pre-approval to get the most accurate picture of your borrowing capacity.
function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value);
var downPayment = parseFloat(document.getElementById("downPayment").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) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) ||
annualIncome < 0 || monthlyDebtPayments < 0 || downPayment < 0 || interestRate < 0 || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
// Lender's typical debt-to-income (DTI) ratio limits
var maxHousingPaymentRatio = 0.28; // 28% of gross monthly income for housing (PITI)
var maxTotalDebtRatio = 0.36; // 36% of gross monthly income for all debts
// Calculate maximum allowed total monthly debt payment
var maxTotalMonthlyDebt = grossMonthlyIncome * maxTotalDebtRatio;
// Calculate maximum affordable monthly mortgage payment (principal & interest only)
var maxAffordableMortgagePayment = maxTotalMonthlyDebt – monthlyDebtPayments;
// Ensure the calculated mortgage payment is not negative
if (maxAffordableMortgagePayment < 0) {
maxAffordableMortgagePayment = 0;
}
// Further constrain by the housing ratio if it's lower
var maxHousingPaymentFromRatio = grossMonthlyIncome * maxHousingPaymentRatio;
if (maxHousingPaymentFromRatio 0 && numberOfPayments > 0) {
// Formula for present value of an ordinary annuity: PV = PMT * [1 – (1 + r)^-n] / r
maxLoanAmount = maxAffordableMortgagePayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else if (maxAffordableMortgagePayment > 0 && numberOfPayments > 0) { // Handle 0% interest rate scenario
maxLoanAmount = maxAffordableMortgagePayment * numberOfPayments;
} else {
maxLoanAmount = 0;
}
// The total home price affordability is the loan amount plus the down payment
var maxHomePrice = maxLoanAmount + downPayment;
// Display results
if (maxHomePrice > 0) {
resultDiv.innerHTML = "
Estimated Affordability:
" +
"Maximum Affordable Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Maximum Home Price You Can Afford: $" + maxHomePrice.toFixed(2) + "" +
"(Note: This is an estimate. Actual loan approval depends on lender's criteria.)";
} else {
resultDiv.innerHTML = "Based on your inputs, your estimated maximum affordable loan amount is $0. Please adjust your inputs or consult a mortgage professional.";
}
}