Understanding how much mortgage you can afford is a crucial first step in the home-buying process. This calculator helps you estimate your potential borrowing capacity based on your income, debts, and desired mortgage terms.
Understanding Mortgage Affordability
The ability to afford a mortgage is primarily determined by two key ratios lenders use: the front-end ratio (housing expenses to income) and the back-end ratio (total debt obligations to income). Most lenders typically allow a maximum debt-to-income (DTI) ratio of around 43%, though this can vary based on your creditworthiness and the specific loan program.
Gross Monthly Income: This is your total income before taxes and other deductions. It's the foundation for determining how much debt you can reasonably take on.
Total Monthly Debt Payments: This includes all your recurring monthly debt obligations, such as credit card payments, auto loans, student loans, and any other installment loans. It *does not* include your current rent or utilities, but it *will* include your estimated future mortgage payment (principal, interest, taxes, and insurance).
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 and can improve your chances of approval.
Estimated Annual Interest Rate: This is the annual percentage rate (APR) you expect to pay on your mortgage. It significantly impacts your monthly payment.
Loan Term: The duration over which you will repay the mortgage, typically expressed in years (e.g., 15, 20, 30 years).
Maximum Debt-to-Income Ratio (DTI): This is the percentage of your gross monthly income that goes towards paying all your monthly debt obligations, including your potential mortgage payment. A common guideline is 43%.
How the Calculation Works:
The calculator first determines the maximum total monthly debt payments you can afford by multiplying your Gross Monthly Income by your Maximum Debt-to-Income Ratio.
It then subtracts your existing Total Monthly Debt Payments from this maximum to find the maximum monthly mortgage payment you can afford.
Using the mortgage formula (M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]), the calculator works backward from your maximum affordable monthly payment, interest rate, and loan term to estimate the maximum loan amount you can qualify for.
Finally, it adds your Down Payment to this maximum loan amount to provide an estimate of the maximum home price you can afford.
Disclaimer: This calculator provides an estimate for informational purposes only and does not constitute a loan approval or commitment. Actual loan amounts and interest rates may vary based on lender policies, your credit score, market conditions, and other factors. It is recommended to consult with a mortgage professional for personalized advice.
function calculateMortgageAffordability() {
var grossMonthlyIncome = parseFloat(document.getElementById("grossMonthlyIncome").value);
var totalMonthlyDebt = parseFloat(document.getElementById("totalMonthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var maxDTI = parseFloat(document.getElementById("maxDTI").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(grossMonthlyIncome) || grossMonthlyIncome <= 0) {
resultDiv.innerHTML = "Please enter a valid Gross Monthly Income.";
return;
}
if (isNaN(totalMonthlyDebt) || totalMonthlyDebt < 0) {
resultDiv.innerHTML = "Please enter a valid Total Monthly Debt Payments.";
return;
}
if (isNaN(downPayment) || downPayment < 0) {
resultDiv.innerHTML = "Please enter a valid Down Payment.";
return;
}
if (isNaN(interestRate) || interestRate <= 0) {
resultDiv.innerHTML = "Please enter a valid Estimated Annual Interest Rate.";
return;
}
if (isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter a valid Loan Term (in years).";
return;
}
if (isNaN(maxDTI) || maxDTI 100) {
resultDiv.innerHTML = "Please enter a valid Maximum Debt-to-Income Ratio (between 1 and 100).";
return;
}
// Calculations
var maxTotalMonthlyDebt = grossMonthlyIncome * (maxDTI / 100);
var maxMortgagePayment = maxTotalMonthlyDebt – totalMonthlyDebt;
if (maxMortgagePayment 0) {
maxLoanAmount = maxMortgagePayment * (Math.pow(1 + monthlyInterestRate, numberOfMonths) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfMonths));
} else { // Handle case for 0% interest rate, though rare for mortgages
maxLoanAmount = maxMortgagePayment * numberOfMonths;
}
var maxHomePrice = maxLoanAmount + downPayment;
// Format results for display
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
var formattedMaxHomePrice = maxHomePrice.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
var formattedMaxMortgagePayment = maxMortgagePayment.toLocaleString('en-US', { style: 'currency', currency: 'USD' });
resultDiv.innerHTML =
"