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Mortgage Affordability Calculator
Understanding how much mortgage you can afford is a crucial first step in the home-buying process. This mortgage affordability calculator helps you estimate the maximum loan amount you might qualify for based on your income, debts, and down payment. By inputting your financial details, you can get a clearer picture of your borrowing power and the types of homes you can realistically consider.
How Mortgage Affordability Works
Lenders assess your ability to repay a mortgage through several key factors. The most common method is the debt-to-income ratio (DTI). This ratio compares your total monthly debt payments (including the potential new mortgage payment, property taxes, homeowner's insurance, and HOA fees) to your gross monthly income.
Front-end DTI (Housing Ratio): This ratio looks at your proposed housing costs (principal, interest, taxes, insurance, and HOA fees) as a percentage of your gross monthly income. Lenders often prefer this to be below 28%.
Back-end DTI (Total Debt Ratio): This ratio includes all your monthly debt obligations (housing costs, credit card payments, student loans, auto loans, etc.) as a percentage of your gross monthly income. Lenders typically aim for this to be below 36%, though it can vary.
Other factors lenders consider include your credit score, employment history, savings, and the loan-to-value ratio (LTV), which is the loan amount compared to the property's appraised value.
Using the Calculator
To use this calculator effectively, gather the following information:
Gross Monthly Income: Your total income before taxes and other deductions.
Estimated Monthly Property Taxes: This can vary significantly by location.
Estimated Monthly Homeowner's Insurance: Get an idea from local real estate agents or insurance providers.
Other Monthly Debt Payments: Include credit card minimum payments, student loan payments, auto loan payments, personal loans, etc.
Down Payment Amount: The cash you plan to put towards the purchase.
Interest Rate: The estimated annual interest rate for your mortgage.
Loan Term (Years): The length of the mortgage (e.g., 15, 30 years).
The calculator will estimate your maximum affordable loan amount, taking into account typical lender DTI limits. Remember, this is an estimate, and your actual approval amount may differ based on the specific lender and your complete financial profile.
Mortgage Affordability Calculator
function calculateMortgageAffordability() {
var grossMonthlyIncome = parseFloat(document.getElementById("grossMonthlyIncome").value);
var estimatedMonthlyTaxes = parseFloat(document.getElementById("estimatedMonthlyTaxes").value);
var estimatedMonthlyInsurance = parseFloat(document.getElementById("estimatedMonthlyInsurance").value);
var otherMonthlyDebt = parseFloat(document.getElementById("otherMonthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(grossMonthlyIncome) || grossMonthlyIncome <= 0 ||
isNaN(estimatedMonthlyTaxes) || estimatedMonthlyTaxes < 0 ||
isNaN(estimatedMonthlyInsurance) || estimatedMonthlyInsurance < 0 ||
isNaN(otherMonthlyDebt) || otherMonthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(annualInterestRate) || annualInterestRate <= 0 ||
isNaN(loanTermYears) || loanTermYears <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Assume max DTI ratios used by lenders for affordability calculation
var maxHousingRatio = 0.28; // 28% front-end DTI
var maxTotalDebtRatio = 0.36; // 36% back-end DTI
// Calculate maximum affordable monthly housing payment based on both ratios
var maxHousingPaymentByFrontEnd = grossMonthlyIncome * maxHousingRatio;
var maxTotalDebtPayment = grossMonthlyIncome * maxTotalDebtRatio;
var maxHousingPaymentByBackEnd = maxTotalDebtPayment – otherMonthlyDebt;
// The most conservative (lowest) maximum housing payment dictates the affordability
var maxMonthlyHousingPayment = Math.min(maxHousingPaymentByFrontEnd, maxHousingPaymentByBackEnd);
if (maxMonthlyHousingPayment <= 0) {
resultDiv.innerHTML = "Based on your inputs and typical lender ratios, you may not be able to afford a mortgage at this time. It's recommended to review your income and debts.";
return;
}
// Components of the maximum monthly housing payment
var maxPrincipalInterest = maxMonthlyHousingPayment – estimatedMonthlyTaxes – estimatedMonthlyInsurance;
if (maxPrincipalInterest <= 0) {
resultDiv.innerHTML = "Your estimated taxes and insurance alone exceed the affordable housing payment based on your income and debt. Consider increasing income, reducing debts, or looking at lower-cost properties.";
return;
}
// Calculate maximum loan amount from Principal & Interest (P&I)
var monthlyInterestRate = (annualInterestRate / 100) / 12;
var loanTermMonths = loanTermYears * 12;
// P = L * [ c(1 + c)^n ] / [ (1 + c)^n – 1] where P is payment, L is loan amount, c is monthly rate, n is number of months
// Rearrange to solve for L: L = P * [ (1 + c)^n – 1] / [ c(1 + c)^n ]
var maxLoanAmount = maxPrincipalInterest * (Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths));
if (isNaN(maxLoanAmount) || maxLoanAmount <= 0) {
resultDiv.innerHTML = "Calculation error. Please check your inputs.";
return;
}
var maxAffordableHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML =
"Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Maximum Affordable Home Price: $" + maxAffordableHomePrice.toFixed(2) + "" +
"This is an estimate based on typical lender debt-to-income ratios (Front-end DTI: " + (maxHousingRatio * 100) + "%, Back-end DTI: " + (maxTotalDebtRatio * 100) + "%). Your actual loan approval may vary.";
}