Use this calculator to estimate how much mortgage you can afford based on your income and debts.
Your Estimated Mortgage Affordability:
Understanding Mortgage Affordability
Determining how much mortgage you can afford is a crucial step in the home-buying process. It's not just about what a lender might approve you for, but also about what fits comfortably within your budget and financial goals. This calculator helps you estimate your maximum affordable mortgage amount and the corresponding monthly payment.
Key Factors Influencing Affordability:
Annual Gross Income: This is the total income you earn before taxes and deductions. Lenders use this as a primary indicator of your ability to repay a loan.
Total Monthly Debt Payments: This includes all your existing recurring debts, such as credit card payments, student loans, auto loans, and personal loans. Lenders subtract these from your income to determine your disposable income.
Down Payment: The upfront cash you pay towards the home purchase. A larger down payment reduces the loan amount needed and can also lead to better interest rates.
Interest Rate: The percentage charged by the lender on the loan amount. Even small differences in interest rates can significantly impact your monthly payment and the total interest paid over the life of the loan.
Loan Term: The duration of the mortgage, typically 15 or 30 years. Shorter terms usually have higher monthly payments but result in less interest paid overall.
How Lenders Assess Affordability (DTI Ratio):
Lenders commonly use the Debt-to-Income (DTI) ratio to assess your ability to manage monthly payments and qualify for a mortgage. There are two main DTI ratios they consider:
Front-End Ratio (Housing Ratio): This compares your potential total housing costs (principal, interest, taxes, insurance – PITI) to your gross monthly income. A common guideline is to keep this below 28%.
Back-End Ratio (Total Debt Ratio): This compares all your monthly debt obligations (including the potential PITI) to your gross monthly income. A common guideline is to keep this below 36%, though some programs allow up to 43% or higher.
This calculator provides an estimate based on general guidelines. It's important to consult with a mortgage professional for personalized advice and pre-approval.
Example Calculation:
Let's say you have:
Annual Gross Income: $90,000
Total Monthly Debt Payments (excluding mortgage): $600
Down Payment: $25,000
Estimated Interest Rate: 6.0%
Loan Term: 30 years
Using the calculator, we can estimate your maximum affordable mortgage.
function calculateMortgageAffordability() {
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("mortgageResult");
var maxMortgageAmountElement = document.getElementById("maxMortgageAmount");
var maxMonthlyPaymentElement = document.getElementById("maxMonthlyPayment");
// Clear previous results
maxMortgageAmountElement.textContent = "";
maxMonthlyPaymentElement.textContent = "";
resultDiv.style.display = "none";
// Input validation
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm)) {
maxMortgageAmountElement.textContent = "Please enter valid numbers for all fields.";
resultDiv.style.display = "block";
return;
}
if (annualIncome <= 0 || monthlyDebt < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0) {
maxMortgageAmountElement.textContent = "Please enter positive values for income, interest rate, and loan term. Debt and down payment cannot be negative.";
resultDiv.style.display = "block";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxHousingPayment = grossMonthlyIncome * 0.28; // 28% front-end ratio
var maxTotalDebtPayment = grossMonthlyIncome * 0.36; // 36% back-end ratio
var maxMonthlyMortgagePayment = maxTotalDebtPayment – monthlyDebt;
// Use the more conservative estimate for the maximum monthly payment
var finalMaxMonthlyPayment = Math.min(maxHousingPayment, maxMonthlyMortgagePayment);
if (finalMaxMonthlyPayment 0) {
maxLoanAmount = finalMaxMonthlyPayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
maxLoanAmount = finalMaxMonthlyPayment * numberOfPayments; // Simple calculation if interest rate is 0
}
var estimatedMaxMortgageAmount = maxLoanAmount;
maxMortgageAmountElement.textContent = "Estimated Maximum Mortgage Amount You Can Afford: $" + estimatedMaxMortgageAmount.toFixed(2);
maxMonthlyPaymentElement.textContent = "Estimated Maximum Monthly Mortgage Payment (P&I): $" + finalMaxMonthlyPayment.toFixed(2);
resultDiv.style.display = "block";
}
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