This calculator helps you estimate the maximum mortgage loan you can afford based on your income, debts, and desired down payment. It's a crucial first step in understanding your home-buying budget.
Understanding Mortgage Affordability
Determining how much mortgage you can afford is a critical step in the home-buying process. Lenders typically use debt-to-income (DTI) ratios to assess your ability to repay a loan. There are two common DTI ratios: the front-end ratio (housing costs only) and the back-end ratio (total debt obligations).
Generally, lenders prefer a back-end DTI ratio of 36% or less, though some may go up to 43% or even higher depending on your creditworthiness and other factors. This calculator estimates your maximum loan amount by considering your income, existing debts, down payment, and the estimated costs associated with homeownership like property taxes, homeowner's insurance, and potentially PMI.
Key Factors:
Annual Gross Income: Your total income before taxes. Lenders assess your ability to repay based on this figure.
Monthly Debt Payments: This includes car loans, student loans, credit card minimum payments, and any other recurring debts, excluding your potential mortgage payment. Lowering these can significantly increase your borrowing power.
Down Payment: The upfront cash you pay towards the home. A larger down payment reduces the loan amount needed and can lead to better loan terms and potentially avoid PMI.
Interest Rate: The percentage charged by the lender. Even small differences in interest rates can significantly impact your monthly payments and the total interest paid over the life of the loan.
Loan Term: The duration of the mortgage, typically 15 or 30 years. Shorter terms mean higher monthly payments but less total interest paid.
Property Taxes & Home Insurance: These are essential costs of homeownership that lenders factor into your total monthly housing expense.
PMI (Private Mortgage Insurance): Usually required if your down payment is less than 20% of the home's purchase price. It protects the lender, not you.
Use this calculator as a guide to get a preliminary estimate. It's always recommended to speak with a mortgage lender for a precise pre-approval.
var calculateMortgageAffordability = function() {
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) / 100;
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var propertyTaxes = parseFloat(document.getElementById("propertyTaxes").value);
var homeInsurance = parseFloat(document.getElementById("homeInsurance").value);
var pmiPercentage = parseFloat(document.getElementById("pmi").value) / 100;
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(propertyTaxes) || isNaN(homeInsurance) || isNaN(pmiPercentage)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
var monthlyIncome = annualIncome / 12;
var maxHousingCost = monthlyIncome * 0.36; // Assuming 36% back-end DTI for maximum housing cost
var maxTotalDebt = monthlyIncome * 0.36; // Max total debt payment
var maxMortgagePayment = maxTotalDebt – monthlyDebt;
if (maxMortgagePayment <= 0) {
resultDiv.innerHTML = "Based on your income and debts, you may not qualify for a mortgage at this time. Consider increasing income or reducing debt.";
return;
}
var monthlyPropertyTaxes = propertyTaxes / 12;
var monthlyHomeInsurance = homeInsurance / 12;
// Estimate PMI cost for calculation purposes (this is an iterative process in reality, but we'll approximate)
// We'll assume a target loan amount to estimate PMI and then refine. Let's start with a rough guess.
var estimatedLoanAmount = maxMortgagePayment * loanTerm * 12; // Very rough guess
var monthlyPmi = (estimatedLoanAmount * pmiPercentage) / 12;
// Adjust maxMortgagePayment to account for taxes, insurance, and PMI
var actualMaxMortgagePayment = maxMortgagePayment – monthlyPropertyTaxes – monthlyHomeInsurance – monthlyPmi;
if (actualMaxMortgagePayment 0) {
maxLoanAmount = actualMaxMortgagePayment * (Math.pow(1 + i, n) – 1) / (i * Math.pow(1 + i, n));
} else { // Handle 0% interest rate case (though unlikely for mortgages)
maxLoanAmount = actualMaxMortgagePayment * n;
}
// Recalculate PMI based on a more refined loan amount estimate if needed, but for simplicity, we'll use the current one.
// If PMI is required (down payment < 20%), we should ensure the calculated loan amount is consistent with PMI being included.
var maxPurchasePrice = maxLoanAmount + downPayment;
// Refine PMI calculation based on the derived maxLoanAmount
var finalMonthlyPmi = 0;
if (downPayment < maxPurchasePrice * 0.20) {
finalMonthlyPmi = (maxLoanAmount * pmiPercentage) / 12;
}
// Re-calculate maxMortgagePayment and maxLoanAmount if PMI changed significantly.
// For this example, we'll proceed with the initial calculation but acknowledge this iterative aspect.
var affordableLoanAmount = maxLoanAmount; // This is the loan amount you can afford
resultDiv.innerHTML = "