Buying a home is one of the most significant financial decisions you'll make. This calculator helps you estimate how much house you can realistically afford by considering your income, existing debts, savings, and the costs associated with purchasing a property. It's crucial to understand the key factors that determine your affordability.
Key Factors in Affordability:
Annual Income: Your total income before taxes is the primary indicator of your ability to handle mortgage payments. Lenders typically use income to assess repayment capacity.
Monthly Debt Payments: This includes all recurring monthly obligations like car loans, student loans, credit card minimums, and other personal loans. High debt-to-income ratios can limit borrowing potential.
Available Savings: You'll need funds for a down payment, closing costs (appraisal fees, title insurance, legal fees, etc.), and potentially some home repairs or furnishings.
Down Payment Percentage: A larger down payment reduces the loan amount, potentially leading to a lower monthly payment and avoiding Private Mortgage Insurance (PMI) if it's 20% or more.
Closing Costs: These are fees paid at the closing of a real estate transaction, typically ranging from 2% to 5% of the loan amount.
Interest Rate: The annual interest rate on your mortgage significantly impacts your monthly payment and the total cost of the loan over time.
Loan Term: The duration of your mortgage (e.g., 15, 30 years). Shorter terms mean higher monthly payments but less interest paid overall.
How the Calculator Works:
This calculator uses a common guideline, often referred to as the "28/36 rule," as a starting point, but then refines it based on your specific inputs:
Debt-to-Income (DTI) Ratios:
Front-end DTI (Housing Ratio): Lenders often suggest that your total housing expenses (principal, interest, taxes, insurance, and HOA fees – PITI) should not exceed 28% of your gross monthly income.
Back-end DTI (Total Debt Ratio): Your total monthly debt obligations (including estimated PITI) should ideally not exceed 36% of your gross monthly income.
This calculator focuses on the income available after covering your existing debts to determine how much can be allocated to a new mortgage payment.
Calculating Maximum Affordable Housing Payment:
Gross Monthly Income = Annual Income / 12
Maximum Monthly Debt Payment Allowed (using 36% rule) = Gross Monthly Income * 0.36
Maximum Housing Payment = Maximum Monthly Debt Payment Allowed – Total Monthly Debt Payments (excluding mortgage)
If this calculated value is negative, it means your existing debts are too high to comfortably afford a mortgage payment.
Estimating Maximum Home Price:
Once the maximum affordable monthly housing payment is determined, the calculator uses a mortgage payment formula to work backward and estimate the loan amount you could support. It then adds your down payment and subtracts closing costs from this to arrive at a potential maximum home price.
The formula for monthly mortgage payment (M) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
n = Total number of payments (Loan Term in Years * 12)
The calculator rearranges this to solve for P (the loan amount) given M (the Maximum Housing Payment).
Then, Maximum Home Price = Loan Amount + Down Payment Amount.
Considering Savings:
The calculator also checks if your available savings are sufficient for the estimated down payment and closing costs based on the calculated maximum home price. If savings are insufficient, the maximum affordable price may be adjusted downwards.
Important Considerations:
This calculator provides an estimate. Actual mortgage approval depends on many factors, including your credit score, lender-specific DTI requirements, employment history, and property appraisal. It's always recommended to speak with a mortgage professional for personalized advice and pre-approval. Remember to factor in other homeownership costs like property taxes, homeowner's insurance, potential HOA fees, and maintenance.
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var availableSavings = parseFloat(document.getElementById("availableSavings").value);
var closingCostsPercentage = parseFloat(document.getElementById("estimatedClosingCostsPercentage").value);
var downPaymentPercentage = parseFloat(document.getElementById("downPaymentPercentage").value);
var interestRate = parseFloat(document.getElementById("estimatedInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
var maxHomePriceDisplay = document.getElementById("maxHomePrice");
var estimatedMonthlyPaymentDisplay = document.getElementById("estimatedMonthlyPayment");
var loanAmountDisplay = document.getElementById("loanAmount");
// Clear previous results
resultDiv.style.display = 'none';
maxHomePriceDisplay.textContent = "Max Home Price: N/A";
estimatedMonthlyPaymentDisplay.textContent = "Estimated Monthly Payment: N/A";
loanAmountDisplay.textContent = "Estimated Loan Amount: N/A";
// — Input Validation —
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(availableSavings) || availableSavings < 0 ||
isNaN(closingCostsPercentage) || closingCostsPercentage <= 0 ||
isNaN(downPaymentPercentage) || downPaymentPercentage < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTermYears) || loanTermYears <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
// — Calculations —
var grossMonthlyIncome = annualIncome / 12;
// Using 36% DTI as a general guideline for total debt (including PITI)
var maxTotalMonthlyObligations = grossMonthlyIncome * 0.36;
var maxHousingPayment = maxTotalMonthlyObligations – monthlyDebt;
// Ensure maxHousingPayment is not negative
if (maxHousingPayment 0 && numberOfPayments > 0) {
// Formula to find P (Principal Loan Amount) from M (Monthly Payment)
// M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// P = M * [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
if (denominator > 0) {
estimatedLoanAmount = maxHousingPayment * (numerator / denominator);
}
} else if (monthlyInterestRate === 0) {
// Special case for 0% interest rate (unlikely but for completeness)
estimatedLoanAmount = maxHousingPayment * numberOfPayments;
} else {
// Invalid interest rate or term for calculation
estimatedLoanAmount = 0;
}
// Ensure loan amount is not negative due to calculation issues
if (estimatedLoanAmount 0 && monthlyInterestRate > 0 && numberOfPayments > 0) {
var p_plus_i_pow_n = Math.pow(1 + monthlyInterestRate, numberOfPayments);
estimatedMonthlyMortgagePayment = estimatedLoanAmount * (monthlyInterestRate * p_plus_i_pow_n) / (p_plus_i_pow_n – 1);
} else if (estimatedLoanAmount > 0 && monthlyInterestRate === 0) {
estimatedMonthlyMortgagePayment = estimatedLoanAmount / numberOfPayments;
} else {
estimatedMonthlyMortgagePayment = 0;
}
// Calculate estimated down payment and closing costs based on potential home price
// This requires an iterative approach or making an assumption.
// Let's assume a target price and work backwards.
// A simpler approach: Estimate max home price assuming down payment and closing costs come *after* loan amount.
// This isn't strictly accurate as down payment and closing costs affect the *total* price.
// For a more accurate model, one would solve for Price (Pr) where:
// Pr – (Pr * downPaymentPercentage / 100) – (Pr * closingCostsPercentage / 100) = estimatedLoanAmount
// Pr * (1 – downPaymentPercentage/100 – closingCostsPercentage/100) = estimatedLoanAmount
// Pr = estimatedLoanAmount / (1 – downPaymentPercentage/100 – closingCostsPercentage/100)
var totalCostPercentage = downPaymentPercentage + closingCostsPercentage;
if (totalCostPercentage >= 100) {
alert("Down payment and closing costs cannot be 100% or more of the home price.");
return;
}
var totalCostFactor = 1 – (totalCostPercentage / 100);
if (totalCostFactor availableSavings) {
// If savings are insufficient, we need to re-calculate the max affordable home price
// based on the available savings.
// maxAffordableHomePrice = availableSavings / (downPaymentPercentage/100 + closingCostsPercentage/100)
// This assumes all available savings are used for down payment and closing costs.
// This is a simplification. A more complex model would factor in how much loan
// can be supported given a fixed amount for down payment + closing costs.
// Let's recalculate based on savings available for down payment + closing costs.
// availableSavings = maxHomePrice * (downPaymentPercentage/100) + maxHomePrice * (closingCostsPercentage/100)
// availableSavings = maxHomePrice * (downPaymentPercentage/100 + closingCostsPercentage/100)
// maxHomePrice = availableSavings / (downPaymentPercentage/100 + closingCostsPercentage/100)
var requiredSavingsPercentage = downPaymentPercentage + closingCostsPercentage;
if (requiredSavingsPercentage availableSavings) {
// This scenario implies that even with 0% down, if closing costs are high,
// you might not afford it. Or if down payment % is very high.
// For simplicity, we'll set loan amount to 0 if down payment alone exceeds savings.
estimatedLoanAmount = 0;
estimatedMonthlyMortgagePayment = 0;
maxAffordableHomePrice = 0; // Cannot afford
} else {
// Calculate new loan amount that fits within this max price and savings constraints
// Loan Amount = MaxHomePrice – DownPayment – ClosingCosts (If savings cover these)
// This is still tricky because the loan amount itself determines the monthly payment,
// which limits the max housing payment, which limits the loan amount.
// A pragmatic approach: Adjust the max home price DOWN to fit savings,
// and then recalculate the loan amount and monthly payment for THAT price.
// Loan amount = maxAffordableHomePrice * (1 – downPaymentPercentage/100 – closingCostsPercentage/100)
totalCostFactor = 1 – (downPaymentPercentage / 100) – (closingCostsPercentage / 100);
if (totalCostFactor 0 && monthlyInterestRate > 0 && numberOfPayments > 0) {
var p_plus_i_pow_n = Math.pow(1 + monthlyInterestRate, numberOfPayments);
estimatedMonthlyMortgagePayment = estimatedLoanAmount * (monthlyInterestRate * p_plus_i_pow_n) / (p_plus_i_pow_n – 1);
} else if (estimatedLoanAmount > 0 && monthlyInterestRate === 0) {
estimatedMonthlyMortgagePayment = estimatedLoanAmount / numberOfPayments;
} else {
estimatedMonthlyMortgagePayment = 0;
}
// Final check: Does the calculated monthly payment (P&I) + estimated taxes/insurance/HOA
// (which we don't have inputs for, so we rely on the initial maxHousingPayment derived from DTI)
// align? The logic here is that maxHousingPayment is the total housing budget.
// P&I MUST be maxHousingPayment) {
// This means even with the savings constraint, the P&I alone exceeds budget.
// Re-calculate loan amount based strictly on maxHousingPayment again.
if (monthlyInterestRate > 0 && numberOfPayments > 0) {
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
if (denominator > 0) {
estimatedLoanAmount = maxHousingPayment * (numerator / denominator);
}
} else if (monthlyInterestRate === 0) {
estimatedLoanAmount = maxHousingPayment * numberOfPayments;
} else {
estimatedLoanAmount = 0;
}
// Recalculate monthly payment for this loan amount
if (estimatedLoanAmount > 0 && monthlyInterestRate > 0 && numberOfPayments > 0) {
var p_plus_i_pow_n = Math.pow(1 + monthlyInterestRate, numberOfPayments);
estimatedMonthlyMortgagePayment = estimatedLoanAmount * (monthlyInterestRate * p_plus_i_pow_n) / (p_plus_i_pow_n – 1);
} else if (estimatedLoanAmount > 0 && monthlyInterestRate === 0) {
estimatedMonthlyMortgagePayment = estimatedLoanAmount / numberOfPayments;
} else {
estimatedMonthlyMortgagePayment = 0;
}
// Recalculate Max Home Price based on this final loan amount
totalCostFactor = 1 – (downPaymentPercentage / 100) – (closingCostsPercentage / 100);
if (totalCostFactor <= 0) {
maxAffordableHomePrice = 0;
} else {
maxAffordableHomePrice = estimatedLoanAmount / totalCostFactor;
}
}
}
// Ensure all final outputs are non-negative
maxAffordableHomePrice = Math.max(0, maxAffordableHomePrice);
estimatedLoanAmount = Math.max(0, estimatedLoanAmount);
estimatedMonthlyMortgagePayment = Math.max(0, estimatedMonthlyMortgagePayment);
}
// Format results
var formattedMaxHomePrice = maxAffordableHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMonthlyPayment = estimatedMonthlyMortgagePayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedLoanAmount = estimatedLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
maxHomePriceDisplay.textContent = "Max Home Price: " + formattedMaxHomePrice;
estimatedMonthlyPaymentDisplay.textContent = "Estimated Monthly Payment (P&I): " + formattedMonthlyPayment;
loanAmountDisplay.textContent = "Estimated Loan Amount: " + formattedLoanAmount;
resultDiv.style.display = 'block';
}