Determining how much house you can afford is a crucial step in the home-buying process. This calculator helps you estimate your maximum affordable mortgage loan amount based on several key financial factors. A common guideline lenders use is the "front-end" and "back-end" debt-to-income (DTI) ratio.
Front-End DTI (Housing Ratio):
This ratio compares your potential total monthly housing costs (principal, interest, property taxes, homeowners insurance, and potentially HOA fees) to your gross monthly income. A common target is to keep this below 28%.
Back-End DTI (Total Debt Ratio):
This ratio compares your total monthly debt obligations (including the potential mortgage payment, credit card payments, car loans, student loans, etc.) to your gross monthly income. Lenders often prefer this to be below 36% to 43%, though it can vary.
How This Calculator Works:
This calculator uses a simplified approach to estimate affordability:
Maximum Monthly Housing Payment: It estimates the maximum monthly payment you could allocate to housing by considering a percentage of your annual income and subtracting your existing monthly debt payments.
Maximum Loan Amount Calculation: Using the estimated maximum monthly housing payment, the interest rate, and the loan term, it calculates the principal loan amount you could borrow.
Impact of Down Payment: Your down payment directly reduces the loan amount needed, increasing the total home price you can afford.
Important Note: This calculator provides an estimate only. Your actual borrowing power will depend on lender-specific criteria, credit score, loan programs, and other factors. It's highly recommended to consult with a mortgage lender for a pre-approval.
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function calculateMortgageAffordability() {
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");
if (isNaN(annualIncome) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTermYears)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
resultDiv.style.color = "red";
return;
}
if (annualIncome <= 0 || monthlyDebtPayments < 0 || downPayment < 0 || interestRate <= 0 || loanTermYears <= 0) {
resultDiv.innerHTML = "Please enter positive values for income, loan term, and interest rate, and non-negative values for debt and down payment.";
resultDiv.style.color = "red";
return;
}
// Assumptions based on common lending guidelines (can be adjusted)
var maxFrontEndRatio = 0.28; // 28% of gross monthly income for housing
var maxBackEndRatio = 0.36; // 36% of gross monthly income for total debt
var grossMonthlyIncome = annualIncome / 12;
// Calculate maximum allowable total monthly debt
var maxTotalMonthlyDebt = grossMonthlyIncome * maxBackEndRatio;
// Calculate maximum allowable monthly housing payment (principal, interest, taxes, insurance)
// We'll use a portion of the gross income, also considering existing debts
var maxMonthlyHousingPayment = Math.min(
grossMonthlyIncome * maxFrontEndRatio,
maxTotalMonthlyDebt – monthlyDebtPayments
);
if (maxMonthlyHousingPayment 0) {
// Formula for present value of an annuity (loan amount)
maxLoanAmount = maxMonthlyHousingPayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
// Simple case if interest rate is 0% (unlikely for mortgages)
maxLoanAmount = maxMonthlyHousingPayment * numberOfPayments;
}
var maxAffordableHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML =
"Estimated Maximum Affordable Home Price: $" + maxAffordableHomePrice.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,') + "" +
"(This includes your $" + downPayment.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,') + " down payment)";
resultDiv.style.color = "#28a745"; // Green color for success
}