Determining how much house you can afford is a crucial step in the home-buying process. It's not just about what a lender will offer you, but also about what you can comfortably manage each month without stretching your budget too thin. This calculator helps you estimate your maximum affordable monthly mortgage payment and, consequently, the maximum loan amount and home price you might be able to consider.
Key Factors:
Annual Household Income: This is your gross annual income from all sources. Lenders often use a Debt-to-Income (DTI) ratio, where the housing payment (including mortgage, property taxes, insurance, and HOA fees) should not exceed a certain percentage (often 28% for the front-end ratio) of your gross monthly income.
Total Monthly Debt Payments: This includes all your recurring monthly debt obligations like car loans, student loans, credit card minimum payments, and personal loans. Lenders typically look at a back-end DTI ratio, which includes your housing payment plus all other debts, usually not exceeding 36% to 43% of your gross monthly income.
Down Payment: The amount of money you put down upfront towards the purchase price of the home. A larger down payment reduces the loan amount needed and can also impact your interest rate and private mortgage insurance (PMI) costs.
Estimated Annual Interest Rate: This is the annual interest rate you expect to pay on your mortgage. Even small changes in interest rates can significantly affect your monthly payment and the total interest paid over the life of the loan.
Loan Term (Years): The duration of the mortgage loan, typically 15 or 30 years. Shorter terms usually have higher monthly payments but lower overall interest paid, while longer terms have lower monthly payments but more interest paid over time.
How the Calculation Works:
This calculator uses common lending guidelines to estimate affordability. It first calculates your available monthly income for housing based on a typical front-end Debt-to-Income (DTI) ratio (commonly around 28%). It subtracts your existing monthly debt payments from your gross monthly income. Then, it uses a standard mortgage payment formula (P = L [1 + c]^n – 1 / ([1 + c]^n – 1), where P is the monthly payment, L is the loan amount, c is the monthly interest rate, and n is the total number of payments) in reverse to determine the maximum loan amount you can afford for your estimated maximum monthly payment. Finally, it adds your down payment to this loan amount to estimate the maximum home price.
Important Note: This calculator provides an estimate only. Actual mortgage approval and the loan amount you qualify for will depend on a lender's specific underwriting criteria, your credit score, loan type, property taxes, homeowner's insurance, and other factors.
Example:
Let's say your Annual Household Income is $90,000. Your Total Monthly Debt Payments (car loan, student loans) are $400. You have a Down Payment of $50,000. You are estimating an Estimated Annual Interest Rate of 6.5%, and a Loan Term of 30 years.
First, the calculator determines your gross monthly income: $90,000 / 12 = $7,500.
Using a common 28% front-end DTI, your maximum housing payment is approximately $7,500 * 0.28 = $2,100.
Using this maximum monthly payment ($1,700), an interest rate of 6.5% (0.065/12 monthly rate), and a loan term of 30 years (360 months), the calculator estimates a maximum loan amount of approximately $266,000.
Adding your down payment: $266,000 (max loan) + $50,000 (down payment) = $316,000 (estimated maximum home price).
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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 loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultsDiv = document.getElementById("results");
var maxMonthlyPaymentSpan = document.getElementById("maxMonthlyPayment");
var maxLoanAmountSpan = document.getElementById("maxLoanAmount");
var maxHomePriceSpan = document.getElementById("maxHomePrice");
// Clear previous results
maxMonthlyPaymentSpan.textContent = "";
maxLoanAmountSpan.textContent = "";
maxHomePriceSpan.textContent = "";
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTermYears) || loanTermYears <= 0) {
resultsDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Common DTI ratios
var frontEndDTIRatio = 0.28; // Typical for housing payment only
var backEndDTIRatio = 0.43; // Typical including all debts
var grossMonthlyIncome = annualIncome / 12;
// Calculate maximum affordable housing payment based on front-end DTI
var maxHousingPaymentBasedOnFrontEnd = grossMonthlyIncome * frontEndDTIRatio;
// Calculate maximum total debt payment based on back-end DTI
var maxTotalDebtPaymentBasedOnBackEnd = grossMonthlyIncome * backEndDTIRatio;
// The actual maximum monthly payment for the mortgage will be the lesser of:
// 1. The maximum housing payment based on front-end DTI.
// 2. The maximum total debt payment based on back-end DTI, minus existing debts.
var maxMonthlyMortgagePayment = Math.min(
maxHousingPaymentBasedOnFrontEnd,
maxTotalDebtPaymentBasedOnBackEnd – monthlyDebtPayments
);
// Ensure the calculated max mortgage payment isn't negative
if (maxMonthlyMortgagePayment 0) {
// Calculate maximum loan amount using the mortgage payment formula in reverse
// M = P [1 – (1 + i)^-n] / i
// Where M is the loan amount, P is the monthly payment, i is the monthly interest rate, n is the number of payments
maxLoanAmount = maxMonthlyMortgagePayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
// If interest rate is 0, loan amount is simply payment * number of payments
maxLoanAmount = maxMonthlyMortgagePayment * numberOfPayments;
}
// Ensure loan amount is not negative
if (maxLoanAmount < 0) {
maxLoanAmount = 0;
}
var maxHomePrice = maxLoanAmount + downPayment;
// Format results
maxMonthlyPaymentSpan.textContent = "$" + maxMonthlyMortgagePayment.toFixed(2);
maxLoanAmountSpan.textContent = "$" + maxLoanAmount.toFixed(2);
maxHomePriceSpan.textContent = "$" + maxHomePrice.toFixed(2);
resultsDiv.innerHTML += "Based on ~" + (frontEndDTIRatio * 100).toFixed(0) + "% front-end DTI and ~" + (backEndDTIRatio * 100).toFixed(0) + "% back-end DTI guidelines.";
}