Determining how much house you can afford is a crucial step in the home-buying process. It's not just about the sale price of the home; it involves a comprehensive look at your financial situation and the total costs associated with homeownership. This Mortgage Affordability Calculator is designed to give you a realistic estimate of your borrowing power.
Key Factors in Mortgage Affordability:
Annual Household Income: This is the primary driver of your borrowing capacity. Lenders assess your ability to repay the loan based on your consistent income.
Monthly Debt Payments: Existing financial obligations like car loans, student loans, and credit card minimum payments reduce the amount of income available for a mortgage. These are often factored into a Debt-to-Income (DTI) ratio.
Down Payment: A larger down payment reduces the loan amount needed, making the mortgage more affordable and potentially securing better loan terms.
Interest Rate: Even small differences in interest rates can significantly impact your monthly payments and the total interest paid over the life of the loan.
Loan Term: The number of years you have to repay the mortgage. Shorter terms mean higher monthly payments but less interest paid overall, while longer terms result in lower monthly payments but more interest.
Property Taxes: These are local government taxes based on the assessed value of your property. They are typically paid annually or semi-annually and are included in your total monthly housing cost (often paid through an escrow account).
Homeowner's Insurance: This insurance protects against damage to your home and is required by lenders. Like property taxes, it's often included in your monthly mortgage payment via escrow.
How the Calculator Works:
This calculator uses common lending guidelines to estimate your maximum affordable mortgage amount. It considers your income, existing debts, and estimates for property taxes and homeowner's insurance. Lenders typically look at two types of Debt-to-Income (DTI) ratios:
Front-End DTI (Housing Ratio): This ratio compares your potential total monthly housing expenses (Principal, Interest, Taxes, Insurance – PITI) to your gross monthly income. A common guideline is to keep this below 28%.
Back-End DTI (Total Debt Ratio): This ratio compares all your monthly debt obligations (including PITI) to your gross monthly income. A common guideline is to keep this below 36%-45%, depending on the lender and loan program.
Our calculator estimates the maximum loan amount you could qualify for by working backward from these DTI guidelines, taking into account your down payment to estimate the maximum purchase price.
Example Calculation:
Let's assume:
Annual Household Income: $90,000
Total Monthly Debt Payments: $400
Down Payment: $25,000
Estimated Annual Interest Rate: 6.5%
Loan Term: 30 years
Estimated Annual Property Taxes: $3,000
Estimated Annual Homeowner's Insurance: $1,500
Based on these figures, the calculator will determine a recommended maximum loan amount and, consequently, an estimated affordable home price.
var calculateMortgageAffordability = function() {
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 propertyTaxesAnnual = parseFloat(document.getElementById("propertyTaxesAnnual").value);
var homeInsuranceAnnual = parseFloat(document.getElementById("homeInsuranceAnnual").value);
var resultDiv = document.getElementById("mortgageResult");
resultDiv.innerHTML = ""; // Clear previous results
// Validate inputs
if (isNaN(annualIncome) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(propertyTaxesAnnual) || isNaN(homeInsuranceAnnual)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (annualIncome <= 0 || monthlyDebtPayments < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0 || propertyTaxesAnnual < 0 || homeInsuranceAnnual < 0) {
resultDiv.innerHTML = "Please enter positive values where applicable.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var monthlyPropertyTaxes = propertyTaxesAnnual / 12;
var monthlyHomeInsurance = homeInsuranceAnnual / 12;
// Common DTI ratios used by lenders
var maxFrontEndRatio = 0.28; // Max housing expense to gross income
var maxBackEndRatio = 0.36; // Max total debt to gross income (conservative)
// Calculate maximum affordable monthly housing payment (PITI) based on front-end ratio
var maxMonthlyHousingPaymentFromFrontEnd = grossMonthlyIncome * maxFrontEndRatio;
// Calculate maximum affordable total monthly debt payment based on back-end ratio
var maxTotalMonthlyDebtFromBackEnd = grossMonthlyIncome * maxBackEndRatio;
// The actual affordable housing payment is limited by the stricter of the two
// However, we need to ensure that the housing payment PLUS existing debt does not exceed the back-end limit.
// So, the maximum we can spend on PITI is the back-end limit minus existing monthly debts.
var maxMonthlyPITI = Math.min(maxMonthlyHousingPaymentFromFrontEnd, maxTotalMonthlyDebtFromBackEnd – monthlyDebtPayments);
if (maxMonthlyPITI 0) {
var factor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanAmount = maxMonthlyPITI * (factor – 1) / (monthlyInterestRate * factor);
} else { // Handle 0% interest rate case, though uncommon for mortgages
maxLoanAmount = maxMonthlyPITI * numberOfPayments;
}
// Ensure that the calculated PITI does not exceed the total PITI budget
var actualPITI = maxLoanAmount * monthlyInterestRate * (Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) + monthlyPropertyTaxes + monthlyHomeInsurance;
if (isNaN(actualPITI) || actualPITI > maxMonthlyPITI + 1) { // Add a small buffer for floating point
// This scenario is unlikely with the current calculation flow but good for robustness
resultDiv.innerHTML = "Calculation error. Please check inputs.";
return;
}
var estimatedMaxPurchasePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML =
"
Your Estimated Mortgage Affordability:
" +
"Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Maximum Purchase Price (with your down payment): $" + estimatedMaxPurchasePrice.toFixed(2) + "" +
"Note: This is an estimate. Actual loan approval depends on lender criteria, credit score, income verification, and other factors. The estimated monthly payment (PITI) for this loan amount would be approximately $" + (maxLoanAmount * monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) + monthlyPropertyTaxes + monthlyHomeInsurance).toFixed(2) + ".";
};