Use this calculator to estimate how much house you can afford based on your income, debts, and down payment. Understanding your mortgage affordability is a crucial first step in the home-buying process.
Estimated Maximum Home Price:
$0
Disclaimer: This is an estimate and does not constitute a loan approval. Actual affordability may vary based on lender policies, credit score, and other financial factors.
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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 resultsDiv = document.getElementById("results");
var maxHomePriceElement = document.getElementById("maxHomePrice");
// Basic validation
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) ||
annualIncome <= 0 || monthlyDebt < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0) {
maxHomePriceElement.textContent = "Please enter valid positive numbers for all fields.";
return;
}
// Lender typically use Debt-to-Income (DTI) ratios.
// Common guidelines suggest a total DTI of around 36-43% of gross monthly income.
// Let's use a conservative 36% for PITI (Principal, Interest, Taxes, Insurance) + existing debt.
var maxAllowedMonthlyPayment = annualIncome / 12 * 0.36;
// Subtract existing monthly debts
var maxMortgagePayment = maxAllowedMonthlyPayment – monthlyDebt;
if (maxMortgagePayment <= 0) {
maxHomePriceElement.textContent = "Your existing debts may make it difficult to qualify for a mortgage. Consult a financial advisor.";
return;
}
// Calculate the maximum loan amount based on the maximum mortgage payment
var monthlyInterestRate = interestRate / 100 / 12;
var numberOfPayments = loanTerm * 12;
// Handle the case where the interest rate is zero to avoid division by zero
var maxLoanAmount;
if (monthlyInterestRate === 0) {
maxLoanAmount = maxMortgagePayment * numberOfPayments;
} else {
// Using the mortgage payment formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Rearranging to solve for P (Principal/Loan Amount): P = M [ (1 + i)^n – 1] / i(1 + i)^n
maxLoanAmount = maxMortgagePayment * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
}
// Maximum home price is the loan amount plus the down payment
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
// Format the output
maxHomePriceElement.textContent = "$" + estimatedMaxHomePrice.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}
Understanding Mortgage Affordability
Estimating how much house you can afford is a critical step before you start house hunting. It helps you set realistic expectations and focus your search on properties within your budget. A mortgage affordability calculator considers several key factors to provide an estimate.
Key Factors Explained:
Annual Income: This is your gross income before taxes. Lenders use this to determine your ability to repay the loan. Lenders often look at your income stability and sources.
Monthly Debt Payments: This includes all your recurring monthly financial obligations, such as car loans, student loans, and credit card minimum payments. These debts reduce the amount of income available for a mortgage payment.
Down Payment: This is the initial amount of money you pay upfront towards the purchase price of the home. A larger down payment reduces the loan amount needed, which can significantly impact your monthly payments and potentially allow you to afford a more expensive home.
Interest Rate: The percentage charged by the lender for borrowing money. Even a small difference in interest rates can substantially affect your monthly payment and the total cost of the loan over time. Rates are influenced by market conditions, your credit score, and the loan type.
Loan Term: The length of time you have to repay the mortgage, typically 15, 20, or 30 years. A shorter loan term generally means higher monthly payments but less interest paid overall. A longer term means lower monthly payments but more interest paid over the life of the loan.
How Affordability is Calculated
Mortgage affordability calculators typically estimate based on Debt-to-Income (DTI) ratios. Lenders use DTI to measure how much of your gross monthly income goes towards paying your debts. A common guideline is that your total monthly debt payments (including your potential mortgage payment, property taxes, and homeowner's insurance – often referred to as PITI) should not exceed a certain percentage of your gross monthly income, usually around 36% to 43%.
Our calculator works by first determining the maximum monthly mortgage payment you might qualify for, based on your income and existing debts. It then uses the provided interest rate and loan term to calculate the maximum loan amount you can afford with that payment. Finally, it adds your down payment to this loan amount to estimate the maximum home price you could potentially afford.
Example: Let's say you have an Annual Income of $100,000, $600 in Monthly Debt Payments, a $50,000 Down Payment, an estimated Interest Rate of 6.5%, and a Loan Term of 30 years. The calculator would estimate your maximum home price.