Determining how much house you can afford is a crucial first step in the home-buying process. The Mortgage Affordability Calculator is designed to give you an estimated maximum loan amount and, consequently, the price range of homes you might be able to purchase, based on your financial situation.
Key Factors Explained:
Annual Household Income: This is the total gross income from all borrowers combined before taxes and deductions. Lenders use this as a primary indicator of your ability to repay a loan.
Total Monthly Debt Payments: Include all recurring monthly obligations such as credit card minimum payments, student loan payments, car loans, and any other installment loans. This helps lenders assess your debt-to-income ratio (DTI).
Down Payment: The amount of money you plan to pay upfront towards the purchase price of the home. A larger down payment reduces the loan amount needed and can lead to better loan terms and lower monthly payments.
Estimated Annual Interest Rate: This is the annual percentage rate (APR) you expect to pay on your mortgage. It significantly impacts your monthly payment. Rates fluctuate based on market conditions and your creditworthiness.
Loan Term (Years): The duration over which you will repay the mortgage. Common terms are 15 and 30 years. Shorter terms usually mean higher monthly payments but less interest paid over the life of the loan.
How the Calculator Works:
This calculator typically uses the front-end debt-to-income ratio (often called the "28% rule") and the back-end debt-to-income ratio (often called the "36% rule") as general guidelines.
Front-End DTI (Housing Ratio): The percentage of your gross monthly income that goes towards housing expenses (principal, interest, taxes, and insurance – PITI). A common guideline is to keep this below 28%.
Back-End DTI (Total Debt Ratio): The percentage of your gross monthly income that goes towards all monthly debt obligations, including housing. A common guideline is to keep this below 36%.
The calculator first estimates your maximum allowable monthly mortgage payment based on your income and existing debts. It then uses this maximum monthly payment, along with the interest rate and loan term, to calculate the maximum loan amount you can afford. Your maximum affordable home price is this loan amount plus your down payment.
Disclaimer: This calculator provides an estimate only and should not be considered a pre-approval or guarantee of loan approval. Your actual borrowing capacity may vary based on lender specific criteria, credit score, market conditions, and other financial factors. It is always recommended to consult with a mortgage professional for personalized advice.
Example:
Let's consider a couple with an Annual Household Income of $100,000. They have Total Monthly Debt Payments of $600 (car loan, student loan). They plan to make a Down Payment of $30,000. They estimate an Interest Rate of 7% and a Loan Term of 30 years.
Using the calculator, it might show that they can afford a maximum loan of approximately $270,000, leading to a maximum home price of around $300,000 ($270,000 loan + $30,000 down payment). This calculation takes into account their income, existing debts, and the estimated housing costs (including PITI).
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function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var debtPayments = parseFloat(document.getElementById("debtPayments").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(debtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) ||
annualIncome <= 0 || debtPayments < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
// Using typical lender guidelines (e.g., 28% for housing, 36% for total debt)
// These are simplified for the calculator. Actual lender criteria vary.
var maxHousingPayment = grossMonthlyIncome * 0.28;
var maxTotalDebtPayment = grossMonthlyIncome * 0.36;
// The maximum allowed monthly payment for the mortgage (PITI)
// must be less than the max housing payment AND less than
// the max total debt payment minus existing debts.
var affordableMonthlyPayment = Math.min(maxHousingPayment, maxTotalDebtPayment – debtPayments);
if (affordableMonthlyPayment 0) {
maxLoanAmount = affordableMonthlyPayment * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
} else { // Handle 0% interest rate scenario (though unlikely for mortgages)
maxLoanAmount = affordableMonthlyPayment * numberOfPayments;
}
var maxHomePrice = maxLoanAmount + downPayment;
// Format the results for display
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 });
var formattedMaxHomePrice = maxHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 });
var formattedAffordableMonthlyPayment = affordableMonthlyPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 });
resultDiv.innerHTML =
"Estimated Maximum Monthly Housing Payment (PITI): " + formattedAffordableMonthlyPayment + "" +
"Estimated Maximum Loan Amount: " + formattedMaxLoanAmount + "" +
"Estimated Maximum Home Price: " + formattedMaxHomePrice + "";
}