Use this calculator to estimate how much house you can afford based on your income, debts, and desired down payment.
Understanding Mortgage Affordability
Determining how much house you can afford is a crucial step in the home-buying process. It's not just about the sticker price of a home; it involves understanding your overall financial picture, including your income, existing debts, and the ongoing costs associated with homeownership.
Key Factors in Mortgage Affordability
Annual Gross Income: This is your total income before taxes and deductions. Lenders use this as a primary indicator of your ability to repay a loan.
Existing Monthly Debt Payments: This includes payments for credit cards, auto loans, student loans, personal loans, and any other recurring debts. Lenders will look at your Debt-to-Income Ratio (DTI), which compares your total monthly debt payments to your gross monthly income. A lower DTI generally means you can afford more.
Down Payment: The amount of money you pay upfront towards the purchase price of the home. A larger down payment reduces the loan amount needed, which can lower your monthly payments and potentially help you avoid Private Mortgage Insurance (PMI).
Interest Rate: The percentage charged by the lender for borrowing money. Even small differences in interest rates can significantly impact your monthly payment and the total interest paid over the life of the loan.
Loan Term: The length of time you have to repay the mortgage, typically 15 or 30 years. Shorter terms mean higher monthly payments but less interest paid overall.
Property Taxes: Taxes levied by local governments based on the assessed value of your property. These are an ongoing cost of homeownership that lenders will factor into your total housing expense.
Homeowners Insurance: Insurance that protects your home against damage from events like fire, theft, and natural disasters. Lenders require this to protect their investment.
Private Mortgage Insurance (PMI): Required by lenders if your down payment is less than 20% of the home's purchase price. It protects the lender in case you default on the loan.
How the Calculator Works
This calculator estimates your maximum affordable home price by considering several common lending guidelines and the total cost of homeownership. It generally works by assessing your capacity to handle a monthly mortgage payment (principal, interest, taxes, and insurance – PITI) after accounting for your existing debts.
A common guideline is that your total monthly housing expenses (PITI) should not exceed a certain percentage of your gross monthly income (often around 28-36%), and your total monthly debt obligations (including PITI) should not exceed another percentage (often around 36-43%). This calculator provides an estimate based on these principles and the inputs you provide.
Example Calculation
Let's say you have an Annual Gross Income of $90,000, meaning your gross monthly income is $7,500. You have Existing Monthly Debt Payments of $400. You plan to make a Down Payment of $50,000 on a home. The estimated Interest Rate is 7%, the Loan Term is 30 years, the Annual Property Tax Rate is 1.1%, Annual Homeowners Insurance is $1,500, and Annual PMI is $600.
The calculator would first determine the maximum PITI you can afford based on DTI ratios and then back into the maximum loan amount and subsequently the maximum home price you could afford, factoring in your down payment.
function calculateAffordability() {
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 propertyTaxRate = parseFloat(document.getElementById("propertyTaxRate").value);
var homeownersInsurance = parseFloat(document.getElementById("homeownersInsurance").value);
var privateMortgageInsurance = parseFloat(document.getElementById("privateMortgageInsurance").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(propertyTaxRate) || isNaN(homeownersInsurance) || isNaN(privateMortgageInsurance) ||
annualIncome <= 0 || monthlyDebt < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0 || propertyTaxRate < 0 || homeownersInsurance < 0 || privateMortgageInsurance < 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var totalMonthlyDebtObligation = monthlyDebt; // Existing debt
// Common DTI limits (these can vary by lender and loan type)
var maxHousingExpenseRatio = 0.36; // Max % of gross monthly income for housing (PITI)
var maxTotalDebtRatio = 0.43; // Max % of gross monthly income for all debts (including PITI)
var maxAffordablePITI = grossMonthlyIncome * maxHousingExpenseRatio;
var maxTotalMonthlyObligation = grossMonthlyIncome * maxTotalDebtRatio;
// Calculate the maximum monthly payment allowed for the mortgage (PITI)
// We need to subtract existing debts to find out how much is left for housing
var remainingForHousing = maxTotalMonthlyObligation – totalMonthlyDebtObligation;
var maxAllowedPITI = Math.min(maxAffordablePITI, remainingForHousing);
if (maxAllowedPITI <= 0) {
resultDiv.innerHTML = "Based on your income and existing debts, you may not qualify for a mortgage at this time.";
return;
}
// Estimate annual costs for taxes, insurance, and PMI
var annualTaxes = (propertyTaxRate / 100) * 1000000; // Initial assumption for home price to estimate taxes
var annualInsurance = homeownersInsurance;
var annualPMI = privateMortgageInsurance;
// Need to iterate to find an estimated home price that works, as taxes depend on price
var estimatedHomePrice = downPayment;
var maxIterations = 100;
var tolerance = 0.01; // How close we need to be
for (var i = 0; i < maxIterations; i++) {
var currentAnnualTaxes = (propertyTaxRate / 100) * estimatedHomePrice;
var totalAnnualHousingCosts = currentAnnualTaxes + annualInsurance + annualPMI;
var totalMonthlyHousingCosts = totalAnnualHousingCosts / 12;
var monthlyPaymentForPrincipalInterest = maxAllowedPITI – totalMonthlyHousingCosts;
if (monthlyPaymentForPrincipalInterest 0) {
maxLoanAmount = monthlyPaymentForPrincipalInterest * (1 – Math.pow(1 + r, -n)) / r;
} else { // Handle case where interest rate is 0 (though unlikely for mortgages)
maxLoanAmount = monthlyPaymentForPrincipalInterest * n;
}
var calculatedHomePrice = maxLoanAmount + downPayment;
// Check if the calculated home price is close enough to the previous estimate
if (Math.abs(calculatedHomePrice – estimatedHomePrice) < tolerance) {
estimatedHomePrice = calculatedHomePrice;
break;
}
estimatedHomePrice = calculatedHomePrice; // Update for the next iteration
// If we haven't converged after max iterations, use the last estimate
if (i === maxIterations – 1) {
estimatedHomePrice = calculatedHomePrice;
}
}
// Ensure the final estimated home price is at least the down payment
if (estimatedHomePrice < downPayment) {
estimatedHomePrice = downPayment;
// Recalculate maxLoanAmount and P&I if home price is just the down payment
var currentAnnualTaxes = (propertyTaxRate / 100) * estimatedHomePrice;
var totalAnnualHousingCosts = currentAnnualTaxes + annualInsurance + annualPMI;
var totalMonthlyHousingCosts = totalAnnualHousingCosts / 12;
var monthlyPaymentForPrincipalInterest = maxAllowedPITI – totalMonthlyHousingCosts;
if (monthlyPaymentForPrincipalInterest 0) {
finalMaxLoanAmount = finalMonthlyPaymentForPrincipalInterest * (1 – Math.pow(1 + r, -n)) / r;
} else {
finalMaxLoanAmount = finalMonthlyPaymentForPrincipalInterest * n;
}
var affordableHomePrice = finalMaxLoanAmount + downPayment;
// Display results
resultDiv.innerHTML += "
Your Estimated Affordability
";
resultDiv.innerHTML += "Based on your inputs, you may be able to afford a home with an estimated price of:";
resultDiv.innerHTML += "$" + affordableHomePrice.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "";
resultDiv.innerHTML += "This includes your down payment of $" + downPayment.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + ".";
resultDiv.innerHTML += "Estimated maximum loan amount: $" + finalMaxLoanAmount.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "";
resultDiv.innerHTML += "Estimated maximum monthly PITI (Principal, Interest, Taxes, Insurance): $" + maxAllowedPITI.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "";
resultDiv.innerHTML += "Disclaimer: This is an estimate only and not a mortgage approval. Lender requirements and market conditions may vary. Consult with a mortgage professional for personalized advice.";
}
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