This calculator uses a standard 36% Debt-to-Income (DTI) ratio to estimate affordability.
function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById('monthlyIncome').value);
var monthlyDebts = parseFloat(document.getElementById('monthlyDebts').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var annualInterest = parseFloat(document.getElementById('interestRate').value);
var years = parseFloat(document.getElementById('loanTerm').value);
if (isNaN(annualIncome) || isNaN(monthlyDebts) || isNaN(downPayment) || isNaN(annualInterest) || isNaN(years) || annualInterest <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
var monthlyGrossIncome = annualIncome / 12;
// Using the 36% DTI rule for back-end ratio
var maxTotalMonthlyDebtAllowed = monthlyGrossIncome * 0.36;
var maxMonthlyPrincipalInterest = maxTotalMonthlyDebtAllowed – monthlyDebts;
if (maxMonthlyPrincipalInterest <= 0) {
alert("Based on your current debt and income, a mortgage may not be advisable. Try reducing debts or increasing income.");
return;
}
var monthlyInterestRate = (annualInterest / 100) / 12;
var numberOfPayments = years * 12;
// Formula for Present Value of an Annuity: PV = P * [(1 – (1 + r)^-n) / r]
var loanAmount = maxMonthlyPrincipalInterest * ((1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate);
var maxHomePrice = loanAmount + downPayment;
document.getElementById('resHomePrice').innerText = "$" + Math.round(maxHomePrice).toLocaleString();
document.getElementById('resLoanAmount').innerText = "$" + Math.round(loanAmount).toLocaleString();
document.getElementById('resMonthlyPayment').innerText = "$" + Math.round(maxMonthlyPrincipalInterest).toLocaleString();
document.getElementById('resDTI').innerText = "36%";
document.getElementById('affordabilityResult').style.display = "block";
}
Understanding Mortgage Affordability: How Much House Can You Buy?
Determining your home buying budget is the most critical step in the real estate journey. While a bank might pre-approve you for a certain amount, understanding your personal mortgage affordability helps ensure you don't become "house poor." This calculator uses standard financial metrics to provide a realistic baseline for your property search.
The 36% Debt-to-Income (DTI) Rule
Most traditional lenders use the Debt-to-Income ratio to assess your ability to repay a loan. The 36% rule suggests that your total debt obligations—including your new mortgage, car loans, student debt, and credit card minimums—should not exceed 36% of your gross monthly income. This calculator prioritizes this conservative "back-end" ratio to ensure you have enough cash flow for maintenance, utilities, and life's unexpected expenses.
Key Factors Influencing Your Budget
Gross Annual Income: This is your total income before taxes. Lenders look at stability and consistency here.
Monthly Debt: Fixed monthly obligations. The lower these are, the more "room" you have for a higher mortgage payment.
Down Payment: The cash you bring to the table. A higher down payment reduces your loan amount and interest costs, and often helps you avoid Private Mortgage Insurance (PMI).
Interest Rate: Even a 1% difference in interest rates can shift your purchasing power by tens of thousands of dollars.
Realistic Example of Affordability
Consider a household with an annual income of $100,000 and monthly car payments of $400. Using the 36% rule:
Monthly Gross Income: $8,333
Total Allowed Monthly Debt (36%): $3,000
Available for Mortgage: $3,000 – $400 = $2,600/month
With an interest rate of 6.5% and a 30-year term, that $2,600 monthly payment supports a loan of roughly $411,000. If that household has $50,000 saved for a down payment, their maximum home price would be approximately $461,000.
How to Increase Your Affordability
If the results of the calculator are lower than you hoped, there are three primary levers you can pull:
Pay down existing debt: Reducing a $300 car payment can significantly increase your borrowing power.
Improve your credit score: A higher score qualifies you for lower interest rates, which reduces the cost of the loan.
Save a larger down payment: This directly increases your "buying power" dollar-for-dollar without increasing your monthly risk.