Mortgage Affordability Calculator
Understanding how much mortgage you can afford is a crucial first step in the home-buying process. This calculator helps you estimate your maximum affordable mortgage payment based on your income, debts, and estimated interest rates. Remember, this is an estimate, and lenders will perform a thorough review of your financial situation.
How Mortgage Affordability is Calculated
Lenders typically use debt-to-income ratios (DTI) to determine how much mortgage you can afford. There are usually two DTI thresholds:
- Front-end DTI (Housing Ratio): This ratio compares your potential total monthly housing expenses (principal, interest, taxes, and insurance – PITI) to your gross monthly income. A common guideline is to keep this below 28%.
- Back-end DTI (Total Debt Ratio): This ratio compares all your monthly debt obligations (including PITI and other debts like car loans, student loans, and credit card payments) to your gross monthly income. A common guideline is to keep this below 36%, though this can be higher depending on your creditworthiness and the loan program.
This calculator provides an estimate by working backward from common DTI guidelines. It estimates the maximum monthly payment you could afford, then calculates the potential loan amount based on that payment, your down payment, and the loan terms. It's important to note that property taxes and homeowner's insurance (PITI components beyond principal and interest) can significantly impact your actual monthly payment and therefore your affordability.
Example Scenario:
Let's say you have an annual gross income of $80,000. Your monthly debt payments (excluding mortgage) are $500. You have a down payment of $20,000. You're looking at an interest rate of 7% for a 30-year loan.
Calculation Steps (Simplified):
- Gross Monthly Income: $80,000 / 12 = $6,666.67
- Maximum Housing Payment (28% DTI): $6,666.67 * 0.28 = $1,866.67
- Maximum Total Debt Payment (36% DTI): $6,666.67 * 0.36 = $2,400.00
- Maximum Allowable P&I Payment: $2,400.00 (Max Total Debt) – $500 (Other Debts) = $1,900.00
- Comparing Housing vs. Total Debt: The more conservative limit is typically the housing payment. However, the total debt limit might allow for a slightly higher P&I if your other debts are low. For simplicity in this estimate, we'll consider the maximum P&I payment you could theoretically support after other debts. Let's use the $1,900 figure derived from the back-end DTI.
- Estimated Maximum Mortgage Loan Amount: Using a mortgage payment formula, a $1,900 monthly payment at 7% interest for 30 years allows for a loan amount of approximately $252,500.
- Estimated Maximum Home Price: $252,500 (Loan Amount) + $20,000 (Down Payment) = $272,500
Therefore, in this example, you might be able to afford a home priced around $272,500, assuming the principal and interest portion of your mortgage payment fits within the lender's DTI requirements.
function calculateAffordability() {
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 loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// — Input Validation —
if (isNaN(annualIncome) || annualIncome <= 0) {
resultDiv.innerHTML = "Please enter a valid annual gross income.";
return;
}
if (isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0) {
resultDiv.innerHTML = "Please enter a valid total monthly debt payment (can be 0).";
return;
}
if (isNaN(downPayment) || downPayment < 0) {
resultDiv.innerHTML = "Please enter a valid down payment amount.";
return;
}
if (isNaN(interestRate) || interestRate = 100) {
resultDiv.innerHTML = "Please enter a valid annual interest rate between 1% and 99%.";
return;
}
if (isNaN(loanTermYears) || loanTermYears <= 0) {
resultDiv.innerHTML = "Please enter a valid loan term in years.";
return;
}
// — Calculations —
var grossMonthlyIncome = annualIncome / 12;
// Common lender guidelines
var maxHousingRatio = 0.28; // 28% for PITI
var maxTotalDebtRatio = 0.36; // 36% for PITI + other debts
var maxMonthlyHousingPayment = grossMonthlyIncome * maxHousingRatio;
var maxTotalMonthlyObligations = grossMonthlyIncome * maxTotalDebtRatio;
// Calculate the maximum P&I payment allowed after other debts
var maxPiPaymentAfterDebts = maxTotalMonthlyObligations – monthlyDebtPayments;
// The affordable P&I payment is limited by whichever is lower:
// the housing ratio or the total debt ratio allowance.
// In practice, lenders often use the lower of the two constraints.
var affordablePiPayment = Math.min(maxMonthlyHousingPayment, maxPiPaymentAfterDebts);
// Ensure the affordable payment is not negative
if (affordablePiPayment 0) {
// Formula to calculate principal from payment:
// P = M * [1 – (1 + r)^-n] / r
maxLoanAmount = affordablePiPayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else { // Handle 0% interest rate case (though unlikely for mortgages)
maxLoanAmount = affordablePiPayment * numberOfPayments;
}
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
// — Display Results —
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedEstimatedMaxHomePrice = estimatedMaxHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedAffordablePiPayment = affordablePiPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedGrossMonthlyIncome = grossMonthlyIncome.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxMonthlyHousingPayment = maxMonthlyHousingPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxTotalMonthlyObligations = maxTotalMonthlyObligations.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxPiPaymentAfterDebts = maxPiPaymentAfterDebts.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = `
Estimated Affordability:
Gross Monthly Income: ${formattedGrossMonthlyIncome}
Max Monthly Housing Payment (28% DTI Guideline): ${formattedMaxMonthlyHousingPayment}
Max Total Monthly Obligations (36% DTI Guideline): ${formattedMaxTotalMonthlyObligations}
Max P&I Payment after other debts: ${formattedMaxPiPaymentAfterDebts}
Your Estimated Maximum Affordable P&I Payment: ${formattedAffordablePiPayment}
Estimated Maximum Mortgage Loan Amount: ${formattedMaxLoanAmount}
Estimated Maximum Home Price (Loan + Down Payment): ${formattedEstimatedMaxHomePrice}
Note: This is an estimate. Actual affordability depends on lender's specific criteria, credit score, loan programs, and includes assumptions for taxes and insurance (PITI).
`;
}
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