Determine a realistic mortgage amount based on your income and common lending guidelines.
Based on your inputs and standard affordability ratios.
Understanding Salary-Based Mortgage Affordability
Purchasing a home is a significant financial decision, and understanding how much you can realistically afford for a mortgage is crucial. This calculator helps estimate your potential mortgage amount based primarily on your income and existing financial obligations. Lenders use various metrics to assess affordability, and this tool simplifies some of those considerations.
How It Works: The Key Ratios
Lenders typically use two main debt-to-income ratios to determine how much they are willing to lend you:
Front-End Ratio (Housing Ratio): This measures the percentage of your gross monthly income that would go towards housing expenses (principal, interest, taxes, and insurance – PITI). A common guideline is that this ratio should not exceed 28%.
Back-End Ratio (Total Debt Ratio): This measures the percentage of your gross monthly income that would cover all your monthly debt obligations, including your proposed mortgage payment, plus existing debts like car loans, student loans, and credit card minimums. A common guideline is that this ratio should not exceed 36%, though this can vary significantly by lender and borrower profile.
Calculator Logic Explained
This calculator uses these ratios to estimate an affordable monthly mortgage payment and then derives the maximum loan amount.
This step ensures that your total debt, including the new mortgage, doesn't exceed the back-end ratio limit.
Calculate Maximum Loan Amount: Using the determined Maximum Affordable Monthly Mortgage Payment, the provided interest rate, and loan term, we calculate the principal loan amount that can be supported. This uses the standard mortgage payment formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment (our Maximum Affordable Monthly Mortgage Payment)
P = Principal Loan Amount (what we are solving for)
n = Total Number of Payments (Loan Term in Years * 12)
Rearranging the formula to solve for P:
P = M * [ (1 + i)^n – 1] / [ i(1 + i)^n ]
Add Down Payment: The estimated maximum mortgage affordability is the loan principal. To find the total home price you might be able to afford, we add your down payment to this calculated maximum loan amount.
Important Considerations:
Lender Variability: These are general guidelines. Actual lending criteria can vary significantly between mortgage lenders, loan types (e.g., FHA, VA, Conventional), and your specific credit profile.
PITI Components: The calculation simplifies taxes and insurance into a rough estimate. Actual property taxes and homeowner's insurance premiums will affect your total monthly housing cost.
Closing Costs: This calculator does not include closing costs, which can be substantial.
Interest Rate Fluctuations: Mortgage rates change daily. The rate you secure will impact your payment and affordability.
Credit Score: A higher credit score generally leads to better interest rates and potentially higher borrowing limits.
Loan Program: Different loan programs have different qualification requirements.
This tool provides a helpful starting point for understanding your mortgage affordability. It's always recommended to speak with a mortgage professional or lender for personalized advice and pre-approval.
function calculateMortgageAffordability() {
var annualSalary = parseFloat(document.getElementById("annualSalary").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");
var maxMortgageAmountDiv = document.getElementById("maxMortgageAmount");
// Clear previous results
resultDiv.style.display = 'none';
maxMortgageAmountDiv.innerHTML = ";
// Input validation
if (isNaN(annualSalary) || annualSalary <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
// — Calculations —
var grossMonthlyIncome = annualSalary / 12;
// Lender Ratio Guidelines (common defaults, can be adjusted)
var maxFrontEndRatio = 0.28; // 28% for housing costs
var maxBackEndRatio = 0.36; // 36% for total debt
var maxHousingPayment = grossMonthlyIncome * maxFrontEndRatio;
var maxTotalDebtPayment = grossMonthlyIncome * maxBackEndRatio;
// Max mortgage payment is limited by total debt ratio minus existing debts
var affordableMonthlyMortgagePayment = maxTotalDebtPayment – monthlyDebt;
// Ensure the affordable payment is not negative if existing debt is high
if (affordableMonthlyMortgagePayment < 0) {
affordableMonthlyMortgagePayment = 0;
}
// The actual monthly payment is also limited by the front-end ratio
affordableMonthlyMortgagePayment = Math.min(affordableMonthlyMortgagePayment, maxHousingPayment);
// If the affordable payment is zero or negative, no mortgage is possible under these rules
if (affordableMonthlyMortgagePayment <= 0) {
maxMortgageAmountDiv.innerHTML = "Based on your income and debt, a mortgage may not be affordable under standard guidelines.";
resultDiv.style.display = 'block';
resultDiv.style.backgroundColor = '#dc3545'; // Red for warning/inadvisable
return;
}
// Mortgage calculation formula (solving for Principal P)
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// Handle case where monthlyInterestRate is 0 to avoid division by zero
var maxLoanPrincipal;
if (monthlyInterestRate === 0) {
maxLoanPrincipal = affordableMonthlyMortgagePayment * numberOfPayments;
} else {
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanPrincipal = affordableMonthlyMortgagePayment * (numerator / denominator);
}
// Ensure loan principal is not negative due to extreme inputs
if (maxLoanPrincipal < 0) {
maxLoanPrincipal = 0;
}
var totalAffordableHomePrice = maxLoanPrincipal + downPayment;
// Format results
var formattedMaxMortgage = '$' + maxLoanPrincipal.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
var formattedHomePrice = '$' + totalAffordableHomePrice.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
maxMortgageAmountDiv.innerHTML = "Estimated Max Mortgage Loan: " + formattedMaxMortgage + "" +
"Estimated Affordable Home Price: " + formattedHomePrice;
resultDiv.style.display = 'block';
resultDiv.style.backgroundColor = 'var(–success-green)'; // Back to green
}