Use this calculator to estimate how much home you can afford based on your income, debts, and down payment.
Understanding Mortgage Affordability
Determining how much house you can afford is a crucial step in the home-buying process. It involves more than just looking at the sticker price of a home; it requires understanding your financial situation and estimating all the costs associated with homeownership.
Key Factors in Mortgage Affordability:
Gross Monthly Income: This is your total income before taxes and other deductions. Lenders often use a debt-to-income (DTI) ratio to assess your ability to repay a loan. A common guideline is that your total housing expenses (principal, interest, taxes, insurance, and sometimes PMI – PITI) should not exceed 28% of your gross monthly income, and your total debt (including housing) should not exceed 36%.
Existing Monthly Debt Payments: This includes payments for credit cards, car loans, student loans, and any other recurring debts. These are factored into your DTI ratio.
Down Payment: The larger your down payment, the less you'll need to borrow, which reduces your monthly payments and potentially avoids Private Mortgage Insurance (PMI).
Interest Rate: Even a small difference in interest rates can significantly impact your monthly payment and the total interest paid over the life of the loan. Rates are influenced by your credit score, market conditions, and the loan term.
Loan Term: Shorter loan terms (e.g., 15 years) have higher monthly payments but result in less interest paid overall. Longer terms (e.g., 30 years) have lower monthly payments but more interest paid over time.
Property Taxes: These are annual taxes assessed by local governments based on the value of your property. They are typically paid monthly as part of your mortgage payment (escrow).
Homeowners Insurance: This insurance protects against damage to your home and liability. It's also usually paid monthly through escrow.
Private Mortgage Insurance (PMI): If your down payment is less than 20% of the home's purchase price, lenders typically require PMI to protect themselves against potential default. This adds to your monthly housing cost.
How the Calculator Works:
Our Mortgage Affordability Calculator takes these key factors into account. It first estimates your maximum housing payment based on common DTI ratios. Then, it calculates the estimated monthly costs of principal, interest, taxes, insurance, and PMI for a given loan amount and term. By working backward or iteratively, it can suggest an affordable home price.
Example:
Let's say you have an Annual Gross Income of $90,000, which translates to $7,500 per month. You have Total Monthly Debt Payments (car loan, student loans) of $600. You have a Down Payment of $50,000. You're looking at a Loan Term of 30 years with an estimated Interest Rate of 6.0%. The Annual Property Tax Rate is 1.1%, and annual Homeowners Insurance is $1,500. You anticipate needing PMI at an Annual PMI Rate of 0.7%.
Based on these inputs, the calculator will estimate your maximum PITI payment and then work towards determining a maximum affordable home price.
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var maxDtiRatio = 0.36; // Total Debt to Income
var maxHousingDtiRatio = 0.28; // Housing Debt to Income
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) / 100;
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var propertyTaxRate = parseFloat(document.getElementById("propertyTaxRate").value) / 100;
var homeInsuranceRate = parseFloat(document.getElementById("homeInsuranceRate").value);
var pmiRate = parseFloat(document.getElementById("pmiRate").value) / 100;
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(propertyTaxRate) || isNaN(homeInsuranceRate) || isNaN(pmiRate)) {
resultDiv.innerHTML = "Error: Please enter valid numbers for all fields.";
return;
}
var monthlyIncome = annualIncome / 12;
var maxTotalDebtPayment = monthlyIncome * maxDtiRatio;
var maxHousingPayment = monthlyIncome * maxHousingDtiRatio;
var maxNonHousingDebt = maxTotalDebtPayment – maxHousingPayment;
var affordableNonHousingDebt = Math.max(0, monthlyDebt – maxNonHousingDebt); // How much of existing debt eats into housing budget
var adjustedMaxHousingPayment = maxHousingPayment – affordableNonHousingDebt;
if (adjustedMaxHousingPayment <= 0) {
resultDiv.innerHTML = "Estimated Affordable Home Price: $0 (Based on your current debt, your income may not support additional housing payments)";
return;
}
// We need to find the maximum loan amount that results in a PITI payment <= adjustedMaxHousingPayment
// PITI = Principal + Interest + Taxes + Insurance + PMI
// P = L * [i(1 + i)^n] / [(1 + i)^n – 1] (Monthly mortgage payment for P&I)
// L = Loan Amount
// i = monthly interest rate
// n = total number of payments (loanTerm * 12)
var monthlyInterestRate = interestRate / 12;
var numberOfPayments = loanTerm * 12;
// Function to calculate P&I payment for a given loan amount
function calculatePI(loanAmount) {
if (monthlyInterestRate === 0) return loanAmount / numberOfPayments; // Handle 0% interest
var principalAndInterest = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
return principalAndInterest;
}
// Estimate annual property tax and home insurance (as fixed amounts for simplicity, but could be percentages)
var annualPropertyTax = 0; // This is typically a percentage of PROPERTY VALUE, not loan amount. Will need iterative approach for perfect accuracy.
var annualHomeInsurance = homeInsuranceRate; // Given as fixed annual amount.
// Estimate annual PMI (as a percentage of loan amount)
var annualPMI = 0;
if (downPayment / (downPayment / (1 – (1 – (0.20 * 0.20))))) < 0.20) { // Crude check if PMI might be needed (if down payment is less than 20% of potential home price – this is tricky without knowing the home price!)
// For simplicity in this calculator, we'll assume PMI is needed if down payment is less than 20% of *some* estimated value.
// A more accurate approach would involve iterative calculation or a simpler assumption.
// Let's assume PMI is needed if the *final loan amount* is more than 80% of the final home price.
// For now, we'll calculate it based on the POTENTIAL loan amount derived from PITI.
// This is an approximation.
}
// Iterate to find max loan amount
var maxLoanAmount = 0;
var testLoanAmount = 10000; // Start with a small loan amount
var increment = 1000; // Increment for testing
var maxIterations = 100000; // Prevent infinite loop
var iteration = 0;
while(iteration < maxIterations) {
var p_and_i = calculatePI(testLoanAmount);
// Estimate taxes and insurance based on current TESTED loan amount. This is a simplification.
// In reality, taxes and insurance are based on HOME VALUE.
// A more robust calculator would need to estimate home value, then taxes/insurance, then loan, then re-evaluate home value.
// For THIS calculator, let's try to back into it differently:
// We know: adjustedMaxHousingPayment = P&I + Taxes + Insurance + PMI
// Let's assume property tax is roughly X% of the LOAN AMOUNT for approximation purposes (not ideal, but simplifies calculation).
// And PMI is Y% of LOAN AMOUNT.
var estimatedAnnualPropertyTaxOnLoan = testLoanAmount * propertyTaxRate; // VERY ROUGH ESTIMATE
var estimatedAnnualPMIOnLoan = testLoanAmount * pmiRate; // If needed
var monthlyTaxesAndInsurance = (estimatedAnnualPropertyTaxOnLoan + annualHomeInsurance + estimatedAnnualPMIOnLoan) / 12;
var totalEstimatedMonthlyPayment = p_and_i + monthlyTaxesAndInsurance;
if (totalEstimatedMonthlyPayment <= adjustedMaxHousingPayment) {
maxLoanAmount = testLoanAmount; // This loan amount fits
testLoanAmount += increment; // Try a higher loan amount
} else {
// This loan amount is too high, the previous one was the max we could afford.
break;
}
iteration++;
}
var affordableHomePrice = maxLoanAmount + downPayment;
var monthlyPAndI = calculatePI(maxLoanAmount);
var monthlyPropertyTax = (affordableHomePrice * propertyTaxRate) / 12; // Better estimate using home price
var monthlyInsurance = annualHomeInsurance / 12;
var monthlyPMI = 0;
if (downPayment < affordableHomePrice * 0.20) {
monthlyPMI = (maxLoanAmount * pmiRate) / 12;
}
var totalEstimatedMonthlyHousingPayment = monthlyPAndI + monthlyPropertyTax + monthlyInsurance + monthlyPMI;
resultDiv.innerHTML = "Estimated Affordable Home Price: $" + affordableHomePrice.toFixed(2) + "" +
"Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Total Monthly Housing Payment (PITI + PMI): $" + totalEstimatedMonthlyHousingPayment.toFixed(2) + "" +
"(Based on a " + loanTerm + "-year loan at " + (interestRate * 100).toFixed(2) + "% interest, $" + downPayment.toFixed(2) + " down payment, " +
(propertyTaxRate * 100).toFixed(2) + "% annual property tax, $" + annualHomeInsurance.toFixed(2) + " annual insurance, and " + (pmiRate * 100).toFixed(2) + "% annual PMI if applicable)";
}