Buying a home is a significant financial decision, and understanding how much you can realistically afford is the crucial first step. A mortgage affordability calculator helps you estimate the maximum loan amount you might qualify for and, consequently, the price range of homes you can consider. This calculator takes into account your income, existing debts, down payment, and the terms of the mortgage itself.
Key Factors in Mortgage Affordability
Lenders use several key metrics to determine how much they are willing to lend you. Two of the most important are the Debt-to-Income (DTI) ratio.
Gross Monthly Income: This is your total income before taxes and deductions. Lenders generally prefer your total housing costs (including mortgage principal, interest, taxes, and insurance) to not exceed 28% of your gross monthly income.
Total Monthly Debt Payments: This includes all your existing monthly financial obligations, such as car payments, student loans, personal loans, and minimum credit card payments.
Down Payment: The larger your down payment, the less you need to borrow, which can significantly impact your affordability and the interest you pay over time. A larger down payment can also help you avoid Private Mortgage Insurance (PMI).
Interest Rate: A lower interest rate means a lower monthly payment for the same loan amount, increasing your purchasing power.
Loan Term: A shorter loan term (e.g., 15 years) results in higher monthly payments but less interest paid overall. A longer loan term (e.g., 30 years) has lower monthly payments but more interest paid over the life of the loan.
How the Calculator Works
This calculator provides an estimate by considering your inputs. It first calculates your estimated maximum monthly mortgage payment based on the common "28/36 rule" (housing costs up to 28% of gross monthly income, and total debt payments including housing up to 36% of gross monthly income). Then, it determines the maximum loan amount you could service with that monthly payment, given the interest rate and loan term. Finally, it adds your down payment to estimate your maximum affordable home price.
Example Calculation:
Let's say you have an Annual Household Income of $120,000, meaning a gross monthly income of $10,000 ($120,000 / 12).
Your Total Monthly Debt Payments (excluding potential mortgage) are $1,200.
You have a Down Payment of $40,000.
The estimated Interest Rate is 7%.
You are considering a Loan Term of 30 years.
Using the 28% rule for housing costs: $10,000 * 0.28 = $2,800 (maximum monthly housing payment).
Using the 36% rule for total debt: $10,000 * 0.36 = $3,600.
Your maximum allowable monthly mortgage payment would be the lesser of $2,800 or ($3,600 – $1,200) = $2,400. So, the maximum PITI (Principal, Interest, Taxes, Insurance) is capped by the total debt rule at $2,400. For simplicity in this calculator, we'll focus on the principal and interest portion that can be supported by the income.
With a maximum monthly payment of, say, $1,800 (considering taxes and insurance will also be part of the P&I payment), a 7% interest rate over 30 years, the maximum loan amount you could afford is approximately $269,000.
Adding your $40,000 down payment, your estimated maximum affordable home price would be around $309,000.
Disclaimer: This calculator provides an estimate only. It does not account for all factors a lender considers, such as credit score, property taxes, homeowner's insurance, or PMI. Always consult with a mortgage professional for a personalized assessment.
function calculateMortgageAffordability() {
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 = parseFloat(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) ||
annualIncome < 0 || monthlyDebt < 0 || downPayment < 0 || interestRate < 0 || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxHousingPaymentRatio = 0.28; // 28% rule for housing costs
var maxTotalDebtRatio = 0.36; // 36% rule for total debt payments
var maxMonthlyHousingPayment = grossMonthlyIncome * maxHousingPaymentRatio;
var maxTotalDebtObligation = grossMonthlyIncome * maxTotalDebtRatio;
var maxMortgagePaymentAllowed = maxTotalDebtObligation – monthlyDebt;
// The actual affordable monthly payment is the lower of the two limits
var affordableMonthlyPayment = Math.min(maxMonthlyHousingPayment, maxMortgagePaymentAllowed);
// Ensure the affordable monthly payment is not negative
if (affordableMonthlyPayment 0) {
// Formula for maximum loan amount based on a fixed monthly payment (M)
// M = P * [r(1 + r)^n] / [(1 + r)^n – 1]
// Rearranged for P (Principal Loan Amount):
// P = M * [(1 + r)^n – 1] / [r(1 + r)^n]
maxLoanAmount = affordableMonthlyPayment * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
} else {
// If interest rate is 0, the loan amount is simply monthly payment * number of payments
maxLoanAmount = affordableMonthlyPayment * numberOfPayments;
}
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML = `
Estimated Affordability:
Gross Monthly Income: $${grossMonthlyIncome.toFixed(2)}
Maximum Monthly Housing Payment (28% Rule): $${maxMonthlyHousingPayment.toFixed(2)}
Maximum Total Debt Obligation (36% Rule): $${maxTotalDebtObligation.toFixed(2)}
Maximum Monthly Mortgage Payment Allowed (considering other debts): $${maxMortgagePaymentAllowed.toFixed(2)}
Estimated Maximum Monthly Mortgage Payment: $${affordableMonthlyPayment.toFixed(2)}
Estimated Maximum Loan Amount: $${maxLoanAmount.toFixed(2)}
Estimated Maximum Affordable Home Price: $${estimatedMaxHomePrice.toFixed(2)}