Determining how much house you can afford is a crucial step in the home-buying process. It's not just about the price tag of the house; it involves understanding your financial situation, the costs associated with homeownership, and the terms of a mortgage. This calculator aims to provide an estimate of your mortgage affordability based on several key financial factors.
Key Factors in Mortgage Affordability:
Annual Household Income: This is the primary driver of how much a lender will consider you can borrow. Lenders often use debt-to-income ratios (DTI) to assess your ability to manage monthly payments.
Down Payment: A larger down payment reduces the loan amount needed, which can lower your monthly payments and potentially qualify you for better loan terms. It also reduces the lender's risk.
Interest Rate: Even a small difference in the interest rate can significantly impact your monthly payments and the total interest paid over the life of the loan.
Loan Term: The length of the mortgage (e.g., 15, 20, 30 years). Shorter terms generally have higher monthly payments but less interest paid overall. Longer terms have lower monthly payments but more interest paid.
Existing Monthly Debt Payments: This includes credit card payments, auto loans, student loans, and any other recurring debts. Lenders will factor these into your DTI ratio.
Property Taxes: These are annual taxes paid to your local government based on the assessed value of your property. They are typically paid monthly as part of your mortgage payment (escrow).
Homeowners Insurance: This insurance protects against damage to your home and its contents. It's also typically paid monthly through escrow.
How the Calculator Works:
This calculator uses a common guideline where lenders often recommend that your total housing expenses (Principal, Interest, Taxes, Insurance – PITI) should not exceed 28% of your gross monthly income, and your total debt obligations (including PITI) should not exceed 36% of your gross monthly income. It then works backward to estimate the maximum loan amount you might qualify for, considering your down payment and other expenses.
Note: This calculator provides an estimate only. Actual mortgage approval depends on a lender's specific underwriting criteria, credit score, employment history, and other factors.
Example Scenario:
Let's say you have an Annual Household Income of $100,000. You have saved a Down Payment of $30,000. The estimated Interest Rate is 5%, and you're looking at a 30-year Loan Term. Your Existing Monthly Debt Payments are $400, and you estimate Annual Property Taxes of $3,000 and Annual Homeowners Insurance of $1,500.
The calculator will take these inputs, estimate your maximum allowable monthly housing payment based on DTI ratios, subtract your existing debts and other homeownership costs (taxes, insurance), and then determine the maximum loan amount you could potentially afford. This loan amount, minus your down payment, would give you an idea of the maximum home price you might be able to purchase.
function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var propertyTaxes = parseFloat(document.getElementById("propertyTaxes").value);
var homeownersInsurance = parseFloat(document.getElementById("homeownersInsurance").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Basic validation
if (isNaN(annualIncome) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(monthlyDebt) || isNaN(propertyTaxes) || isNaN(homeownersInsurance) ||
annualIncome <= 0 || interestRate < 0 || loanTerm <= 0 || monthlyDebt < 0 || propertyTaxes < 0 || homeownersInsurance < 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Convert annual figures to monthly
var monthlyIncome = annualIncome / 12;
var monthlyPropertyTaxes = propertyTaxes / 12;
var monthlyHomeownersInsurance = homeownersInsurance / 12;
// Lender guideline: front-end ratio (housing costs) – typically 28% of gross monthly income
var maxMonthlyHousingPayment = monthlyIncome * 0.28;
// Lender guideline: back-end ratio (total debt) – typically 36% of gross monthly income
var maxTotalMonthlyDebt = monthlyIncome * 0.36;
// Calculate the maximum monthly PITI (Principal, Interest, Taxes, Insurance)
// We need to ensure that the total debt (PITI + monthlyDebt) does not exceed maxTotalMonthlyDebt
var maxMonthlyPITI = maxTotalMonthlyDebt – monthlyDebt;
// Ensure maxMonthlyPITI is not negative (if existing debt is very high)
if (maxMonthlyPITI 0) {
var termFactor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanAmount = targetMonthlyPITI * (termFactor – 1) / (monthlyInterestRate * termFactor);
} else {
// If interest rate is 0, loan amount is simply monthly payment * number of payments
maxLoanAmount = targetMonthlyPITI * numberOfPayments;
}
// The maximum home price is the maximum loan amount plus the down payment
var maxHomePrice = maxLoanAmount + downPayment;
// Calculate estimated monthly payment for this affordability
var estimatedMonthlyPayment = 0;
if (monthlyInterestRate > 0) {
var termFactor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
estimatedMonthlyPayment = maxLoanAmount * (monthlyInterestRate * termFactor) / (termFactor – 1);
} else {
estimatedMonthlyPayment = maxLoanAmount / numberOfPayments;
}
// Add back taxes and insurance to get the total estimated monthly housing cost
var totalEstimatedMonthlyHousingCost = estimatedMonthlyPayment + monthlyPropertyTaxes + monthlyHomeownersInsurance;
// Display results
resultDiv.innerHTML += "