Determining how much house you can afford is a crucial step in the home-buying process. This calculator helps estimate your potential mortgage affordability by considering your income, existing debts, down payment, interest rates, and loan terms.
Key Factors:
Annual Household Income: This is the total income earned by all borrowers combined before taxes. Lenders use this as a primary indicator of your ability to repay a loan.
Total Monthly Debt Payments: This includes all recurring monthly payments for debts such as car loans, student loans, credit card minimum payments, and personal loans. Lenders look at your debt-to-income ratio (DTI) to assess risk.
Down Payment: The upfront amount of cash you pay towards the purchase price of the home. A larger down payment reduces the loan amount needed and can improve your borrowing terms.
Estimated Annual Interest Rate: The annual interest rate on your mortgage loan. This significantly impacts 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 mean higher monthly payments but less interest paid overall, while longer terms result in lower monthly payments but more interest paid.
How it Works:
This calculator uses common lending guidelines to estimate your maximum affordable mortgage payment. It generally considers two main DTI ratios:
Front-End Ratio (Housing Ratio): Typically, lenders prefer this to be no more than 28% of your gross monthly income. This ratio covers the principal, interest, taxes, and insurance (PITI) of your potential mortgage payment.
Back-End Ratio (Total Debt Ratio): Usually, lenders prefer this not to exceed 36% of your gross monthly income. This includes PITI plus all other monthly debt obligations.
The calculator estimates the maximum P&I (Principal and Interest) payment you can afford based on these ratios, then factors in your down payment to suggest a potential maximum loan amount. Keep in mind that lender approval also depends on your credit score, employment history, and other factors.
Example:
Let's say you have an annual household income of $90,000, total monthly debt payments of $600, a down payment of $40,000, an estimated interest rate of 6.5%, and a loan term of 30 years.
In this scenario, the calculator might suggest a maximum affordable monthly P&I payment of around $1,575 (based on a 36% DTI). With a $40,000 down payment, this could translate to a maximum loan amount of approximately $365,000, allowing for a home purchase price of around $405,000.
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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 = parseInt(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)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
// Common DTI ratios
var maxFrontEndRatio = 0.28; // 28% for housing
var maxBackEndRatio = 0.36; // 36% for total debt
var grossMonthlyIncome = annualIncome / 12;
// Calculate maximum allowable total debt payment (including proposed mortgage PITI)
var maxTotalMonthlyObligations = grossMonthlyIncome * maxBackEndRatio;
// Calculate maximum affordable monthly mortgage payment (PITI)
var maxMonthlyMortgagePayment = maxTotalMonthlyObligations – monthlyDebt;
// Ensure monthly mortgage payment is not negative
if (maxMonthlyMortgagePayment This is wrong. It should be P = M * [ (1 – (1+r)^-n) / r ]
// Let's use the standard mortgage payment formula for P&I and work backwards.
// M = P * [r * (1+r)^n] / [(1+r)^n – 1]
// Where M is monthly payment, P is principal, r is monthly interest rate, n is number of months.
// We have M (maxMonthlyMortgagePayment, assuming it's P&I for simplicity here) and want to find P.
// So, P = M * [(1+r)^n – 1] / [r * (1+r)^n]
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanAmount = maxMonthlyMortgagePayment * (numerator / denominator);
}
// Ensure loan amount is not negative due to calculation artifacts
if (maxLoanAmount < 0) {
maxLoanAmount = 0;
}
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 formattedMaxMonthlyMortgagePayment = maxMonthlyMortgagePayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedGrossMonthlyIncome = grossMonthlyIncome.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMonthlyDebt = monthlyDebt.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedAnnualIncome = annualIncome.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = `
Estimated Maximum Affordable Monthly Payment (P&I): ${formattedMaxMonthlyMortgagePayment}
Estimated Maximum Loan Amount: ${formattedMaxLoanAmount}
Estimated Maximum Home Purchase Price: ${formattedMaxHomePrice}
Based on Gross Monthly Income: ${formattedGrossMonthlyIncome} (${formattedAnnualIncome}/year)
Includes existing monthly debts of ${formattedMonthlyDebt}
Assumes DTI of ${maxBackEndRatio * 100}% and Interest Rate of ${interestRate}% for ${loanTerm} years.
`;
}