Use this calculator to estimate how much house you can afford based on your income, debts, and down payment. This tool provides a preliminary estimate and does not guarantee loan approval. Lenders will consider many other factors, including credit score, loan terms, and market conditions.
Understanding Mortgage Affordability
Determining how much house you can afford is a crucial step in the home-buying process. Several key factors influence your borrowing power. This calculator helps estimate your potential mortgage affordability by considering your financial inputs.
Key Factors Explained:
Annual Gross Income: This is your total income before taxes and other deductions. Lenders often use a debt-to-income (DTI) ratio, where your gross income is the denominator. A lower DTI generally means you can afford more.
Total Monthly Debt Payments: This includes all your existing recurring monthly financial obligations such as credit card payments, student loans, auto loans, and personal loans. These are subtracted from your income to determine how much is available for a mortgage payment.
Down Payment Amount: The larger your down payment, the less you need to borrow, which can significantly reduce your monthly payments and the total interest paid over the life of the loan. It also often influences the interest rate you may be offered.
Estimated Annual Interest Rate: This is the yearly rate at which interest is charged on your loan. Even small differences in interest rates can have a substantial impact on your monthly payment and the total cost of the home over time.
Loan Term: This is the duration over which you will repay the loan, typically 15, 20, or 30 years. Shorter loan terms result in higher monthly payments but less interest paid overall. Longer terms mean lower monthly payments but more interest paid.
How the Calculation Works (Simplified):
This calculator makes a simplified estimate. A common guideline is that your total housing expenses (principal, interest, taxes, and insurance – PITI) should not exceed 28% of your gross monthly income, and your total debt (including PITI) should not exceed 36% of your gross monthly income. This tool works backward from your income and existing debts to estimate the maximum loan amount you might qualify for, considering a potential interest rate and loan term.
Disclaimer: This is a preliminary estimate only. Actual loan amounts and approval depend on a lender's full underwriting process, including credit history, employment stability, property appraisal, and current market conditions.
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 resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) ||
annualIncome < 0 || monthlyDebt < 0 || downPayment < 0 || interestRate < 0 || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// General affordability rules of thumb
var maxHousingExpenseRatio = 0.28; // 28% of gross monthly income for housing (PITI)
var maxTotalDebtRatio = 0.36; // 36% of gross monthly income for all debts (including PITI)
var monthlyIncome = annualIncome / 12;
// Calculate maximum PITI based on total debt ratio
var maxTotalMonthlyPayment = monthlyIncome * maxTotalDebtRatio;
var maxPITI = maxTotalMonthlyPayment – monthlyDebt;
// Ensure maxPITI is not negative
if (maxPITI 0) {
// Formula for maximum loan amount given PITI, interest rate, and term
// M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where M = monthly payment (max PITI here), P = principal (loan amount), i = monthly interest rate, n = number of months
// Rearranging for P: P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var numerator = Math.pow(1 + monthlyInterestRate, numberOfMonths) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfMonths);
if (denominator > 0) {
maxLoanAmount = maxPITI * (numerator / denominator);
} else {
// Handle cases where interest rate is effectively zero or calculation is unstable
maxLoanAmount = maxPITI * numberOfMonths; // Simple interest over time
}
} else {
// If interest rate is 0, the loan amount is simply PITI * number of months
maxLoanAmount = maxPITI * numberOfMonths;
}
// Ensure loan amount is not negative
maxLoanAmount = Math.max(0, maxLoanAmount);
var maxHomePrice = maxLoanAmount + downPayment;
// Format results for display
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxHomePrice = maxHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMonthlyIncome = monthlyIncome.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMonthlyDebt = monthlyDebt.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxPITI = maxPITI.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = `
Estimated Affordability:
Based on your inputs:
Estimated Maximum Monthly Housing Payment (PITI): ${formattedMaxPITI}
Estimated Maximum Loan Amount: ${formattedMaxLoanAmount}
Estimated Maximum Home Price (Loan + Down Payment): ${formattedMaxHomePrice}