Determining how much house you can afford is a crucial step in the home-buying process. It's not just about finding a house you like; it's about finding a house that fits comfortably within your financial means. Several key factors contribute to your overall mortgage affordability, and this calculator is designed to give you a clearer picture.
Key Factors in Mortgage Affordability:
Annual Household Income: This is the primary driver of your borrowing capacity. Lenders look at your total income from all sources to assess your ability to repay a loan.
Monthly Debt Payments: Existing financial obligations like car loans, student loans, and credit card payments reduce the amount of income available for a mortgage. Lenders often use a Debt-to-Income (DTI) ratio, and higher existing debts mean less room for a mortgage payment.
Down Payment: A larger down payment reduces the amount you need to borrow, potentially leading to a smaller loan, lower monthly payments, and possibly better interest rates. It also signifies a lower risk for the lender.
Interest Rate: Even small changes in the interest rate can significantly impact your monthly payment and the total interest paid over the life of the loan. This calculator uses an estimated rate to provide a projection.
Loan Term: The length of your mortgage (e.g., 15, 30 years) affects your monthly payments. Shorter terms have higher monthly payments but result in less interest paid overall. Longer terms have lower monthly payments but more interest.
How the Calculator Works:
This calculator provides an estimate of your maximum affordable home price based on common lending guidelines. It considers your income, existing debts, and down payment to estimate the maximum monthly mortgage payment you might qualify for. It then works backward, using your estimated interest rate and loan term, to determine the potential loan amount and, consequently, the maximum home price you could afford.
Disclaimer: This calculator is for estimation purposes only and does not constitute financial advice. Your actual borrowing capacity will depend on the specific lender, your credit score, current market conditions, and a full underwriting process.
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
if (isNaN(annualIncome) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
// — Affordability Calculation Logic —
// Common guideline: Housing expenses (PITI) should not exceed 28% of gross monthly income
var grossMonthlyIncome = annualIncome / 12;
var maxHousingPayment = grossMonthlyIncome * 0.28;
// Common guideline: Total debt (including proposed PITI) should not exceed 36% of gross monthly income
var maxTotalDebtPayment = grossMonthlyIncome * 0.36;
// Calculate maximum allowable mortgage payment (including principal, interest, taxes, insurance)
// We assume taxes and insurance (TI) are roughly 1% of home value annually, or 1/12% monthly.
// This is a simplification for estimation.
var estimatedAnnualTaxesAndInsurance = (maxTotalDebtPayment – monthlyDebtPayments) * 0.20; // Rough estimate of what's left for P&I after existing debt and PITI is considered. This is a complex area and highly variable.
var estimatedMonthlyTaxesAndInsurance = estimatedAnnualTaxesAndInsurance / 12;
var maxMonthlyPrincipalAndInterest = maxHousingPayment – estimatedMonthlyTaxesAndInsurance;
if (maxMonthlyPrincipalAndInterest 0) {
// Mortgage payment formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Rearranging to solve for P (Principal/Loan Amount): P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
maxLoanAmount = maxMonthlyPrincipalAndInterest * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
} else {
// Handle zero interest rate (though unlikely for mortgages)
maxLoanAmount = maxMonthlyPrincipalAndInterest * numberOfPayments;
}
var affordableHomePrice = maxLoanAmount + downPayment;
// Display results
resultDiv.innerHTML = `