Your Estimated Mortgage Affordability
Enter your details above to see your estimated maximum mortgage amount.
Understanding Mortgage Affordability
Determining how much mortgage you can afford is a crucial step in the home-buying process. It helps you set realistic expectations and narrow down your property search. This calculator estimates your maximum affordable mortgage amount based on several key financial factors.
Key Factors Explained:
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Annual Household Income: This is the total income earned by all borrowers before taxes. Lenders look at your income to assess your ability to repay the loan.
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Monthly Debt Payments (excluding mortgage): This includes all your recurring monthly debt obligations like car loans, student loans, and credit card payments. Lenders use this to calculate your Debt-to-Income (DTI) ratio. A lower DTI generally means you can afford a larger loan.
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Down Payment Amount: The upfront cash you pay towards the purchase price of the home. A larger down payment reduces the loan amount needed, making the mortgage more affordable and potentially lowering your interest rate and Private Mortgage Insurance (PMI) costs.
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Estimated Mortgage Interest Rate (%): This is the annual interest rate you expect to pay on your mortgage. Higher interest rates mean higher monthly payments for the same loan amount, thus reducing your affordability. Rates fluctuate based on market conditions and your creditworthiness.
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Loan Term (Years): The duration over which you will repay the mortgage. Common terms are 15, 20, or 30 years. Shorter loan terms result in higher monthly payments but less total interest paid over the life of the loan. Longer terms have lower monthly payments, increasing affordability but costing more in interest over time.
How the Calculator Works:
This calculator uses a common guideline where lenders often approve mortgages for borrowers whose total housing expenses (including principal, interest, property taxes, and homeowners insurance – often called PITI) do not exceed 28% of their gross monthly income, and whose total debt payments (including PITI) do not exceed 36% of their gross monthly income. This is known as the "28/36 rule".
The calculation estimates the maximum monthly payment you can afford by considering your income and existing debts. It then works backward to determine the largest loan amount you could take on with that monthly payment, given the specified interest rate and loan term.
Disclaimer: This calculator provides an estimate for informational purposes only and is not a loan approval or a guarantee of financing. Actual loan approval depends on a lender's specific underwriting criteria, your credit score, property appraisal, and other factors. It's always recommended to consult with a mortgage professional for personalized advice.
Example Calculation:
Let's say you have:
- Annual Household Income: $90,000
- Monthly Debt Payments (excluding mortgage): $400
- Down Payment: $25,000
- Estimated Mortgage Interest Rate: 7.0%
- Loan Term: 30 Years
Based on these inputs, the calculator might estimate your maximum affordable mortgage amount. A higher down payment or lower interest rate would increase the potential mortgage amount.
function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var existingDebts = parseFloat(document.getElementById("existingDebts").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value) / 100; // Convert percentage to decimal
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Validate inputs
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(existingDebts) || existingDebts < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
// Using the 28/36 rule as a general guideline
var maxHousingPayment = grossMonthlyIncome * 0.28;
var maxTotalDebtPayment = grossMonthlyIncome * 0.36;
// Maximum allowed monthly mortgage payment (principal & interest, assuming taxes/insurance are separate or included in budget)
// We subtract existing debts from the total debt capacity to find the remaining capacity for housing costs.
var affordableMonthlyMortgagePayment = Math.min(maxHousingPayment, maxTotalDebtPayment – existingDebts);
if (affordableMonthlyMortgagePayment 0) {
var factor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanAmount = affordableMonthlyMortgagePayment * (factor – 1) / (monthlyInterestRate * factor);
} else { // Handle case for 0% interest, though unlikely for mortgages
maxLoanAmount = affordableMonthlyMortgagePayment * numberOfPayments;
}
// The total price of the home would be the max loan amount + down payment
var maxHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML = `
Estimated Maximum Affordable Monthly Mortgage Payment (P&I): $${affordableMonthlyMortgagePayment.toFixed(2)}
Estimated Maximum Mortgage Loan Amount: $${maxLoanAmount.toFixed(2)}
Estimated Maximum Home Purchase Price (Loan + Down Payment): $${maxHomePrice.toFixed(2)}
This estimate assumes the 28% front-end and 36% back-end debt-to-income ratios. Actual loan amounts may vary based on lender policies, credit score, property taxes, homeowners insurance, and other factors.
`;
}
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