Understanding how much you can afford to borrow for a mortgage is a crucial first step in the home-buying process. This calculator helps you estimate your maximum affordable mortgage amount based on your income, debts, and desired monthly payment. Remember, this is an estimate and lenders will have their own specific criteria.
Your Estimated Mortgage Affordability:
How Mortgage Affordability is Calculated
Lenders typically use a debt-to-income (DTI) ratio to determine how much you can borrow. There are two common DTI ratios:
Front-end DTI (Housing Ratio): This ratio compares your proposed total monthly housing expenses (principal, interest, taxes, and insurance – PITI) to your gross monthly income. Lenders often prefer this to be no more than 28%.
Back-end DTI (Total Debt Ratio): This ratio compares your proposed total monthly housing expenses PLUS all other monthly debt obligations (car loans, student loans, credit card minimum payments) to your gross monthly income. Lenders often prefer this to be no more than 36%, though this can vary.
This calculator estimates your maximum affordable loan amount by working backward from these DTI limits. It assumes a maximum PITI payment you can afford and then calculates the loan principal based on your desired interest rate and loan term. Your down payment is then added to this loan amount to give you an estimated maximum home price you might be able to afford.
Important Considerations:
Interest Rate Fluctuations: Mortgage rates can change daily. The rate you use here is an estimate.
Property Taxes and Homeowners Insurance: These costs vary significantly by location and property type. They are essential components of your monthly housing payment (PITI).
Private Mortgage Insurance (PMI): If your down payment is less than 20%, you will likely need to pay PMI, which adds to your monthly cost.
Other Housing Costs: Don't forget potential costs like HOA fees, maintenance, and repairs.
Lender Specifics: Different lenders have different DTI thresholds and qualification requirements. This calculator provides a general estimate.
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function calculateMortgageAffordability() {
var monthlyIncome = parseFloat(document.getElementById("monthlyIncome").value);
var existingDebts = parseFloat(document.getElementById("existingDebts").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Validate inputs
if (isNaN(monthlyIncome) || monthlyIncome <= 0) {
resultDiv.innerHTML = "Please enter a valid gross monthly income.";
return;
}
if (isNaN(existingDebts) || existingDebts < 0) {
resultDiv.innerHTML = "Please enter a valid total monthly debt payments.";
return;
}
if (isNaN(interestRate) || interestRate 50) {
resultDiv.innerHTML = "Please enter a valid annual interest rate (e.g., 5.5).";
return;
}
if (isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter a valid loan term in years.";
return;
}
if (isNaN(downPayment) || downPayment < 0) {
resultDiv.innerHTML = "Please enter a valid down payment amount.";
return;
}
// Using a common guideline: Total Debt Ratio (Back-end DTI) of 36%
var maxTotalDebtPayment = monthlyIncome * 0.36;
var maxHousingPayment = maxTotalDebtPayment – existingDebts;
if (maxHousingPayment <= 0) {
resultDiv.innerHTML = "Your existing debts are too high to qualify for a mortgage based on a 36% DTI.";
return;
}
// Calculate mortgage payment for a given loan amount, interest rate, and term
// Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where M = monthly payment, P = principal loan amount, i = monthly interest rate, n = total number of payments
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// We want to find P, so we rearrange the formula:
// P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var principalAmount = maxHousingPayment * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
var estimatedMaxHomePrice = principalAmount + downPayment;
// Format currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0,
});
resultDiv.innerHTML = formatter.format(estimatedMaxHomePrice) + " (Estimated Max Home Price)";
}