Estimate your potential mortgage borrowing power based on your income and debts.
Your Estimated Maximum Mortgage
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Understanding Your Mortgage Affordability
Determining how much home you can afford is a crucial first step in the home-buying process. A mortgage affordability calculator, like this one designed to give you an estimate aligned with typical lending considerations, helps you gauge your borrowing power. It takes into account your income, existing debts, and the potential terms of a new mortgage to estimate the maximum loan amount you might qualify for and, consequently, the price of the home you could potentially purchase.
How This Calculator Works: The Math Behind Affordability
Lenders generally use debt-to-income (DTI) ratios to assess a borrower's ability to repay a loan. This calculator employs a simplified approach based on common DTI thresholds used by lenders, focusing on two key ratios:
Front-End Ratio (Housing Ratio): This measures the percentage of your gross monthly income that would go towards housing expenses (principal, interest, property taxes, and homeowner's insurance – often referred to as PITI). A common guideline is that PITI should not exceed 28% of your gross monthly income.
Back-End Ratio (Total Debt Ratio): This measures the percentage of your gross monthly income that would go towards all your monthly debt obligations, including your potential new mortgage payment (PITI) plus existing debts like car loans, student loans, and credit card payments. A common guideline is that total debt should not exceed 36% of your gross monthly income.
Our calculator focuses on the back-end ratio (36%) as a primary driver for affordability, as it offers a more comprehensive view of your financial obligations.
Calculation Steps:
Calculate Gross Monthly Income: Your annual income is divided by 12.
Calculate Allowable Monthly Debt: The calculator determines the maximum total monthly debt you can afford by multiplying your gross monthly income by the target back-end DTI ratio (e.g., 36% or 0.36).
Determine Maximum Monthly Mortgage Payment: Subtract your existing total monthly debt payments from the allowable monthly debt. This difference represents the maximum you can allocate towards your new mortgage payment (PITI).
Estimate Maximum Loan Amount: Using an amortization formula, the calculator works backward from the maximum monthly mortgage payment to estimate the principal loan amount you could borrow, given the specified interest rate and loan term. This involves solving for the loan principal (P) in the standard mortgage payment formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Maximum Monthly Mortgage Payment (PITI)
P = Principal Loan Amount (what we're solving for)
n = Total Number of Payments (Loan Term in Years * 12)
Calculate Affordable Home Price: The maximum loan amount is then added to your estimated down payment to provide an estimated affordable home price.
Important Considerations:
This calculator provides an estimate. Actual loan approval depends on many factors, including:
Credit Score: A higher credit score generally leads to better interest rates and higher borrowing limits.
Loan Type: Different loan programs (e.g., FHA, VA) have different DTI requirements.
Property Taxes and Homeowner's Insurance: These vary significantly by location and property type and affect your PITI.
Private Mortgage Insurance (PMI): If your down payment is less than 20%, PMI will increase your monthly payment.
Lender Specific Guidelines: Chase Bank, like all lenders, has its own proprietary underwriting criteria.
Closing Costs: These are additional expenses not included in this affordability calculation.
It is highly recommended to speak directly with a mortgage professional at Chase or another reputable lender for a personalized pre-approval and accurate affordability assessment.
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0) {
alert("Please enter a valid annual income.");
return;
}
if (isNaN(monthlyDebt) || monthlyDebt < 0) {
alert("Please enter a valid monthly debt amount.");
return;
}
if (isNaN(downPayment) || downPayment < 0) {
alert("Please enter a valid down payment amount.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate <= 0) {
alert("Please enter a valid annual interest rate.");
return;
}
if (isNaN(loanTerm) || loanTerm <= 0) {
alert("Please enter a valid loan term in years.");
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxTotalDebtRatio = 0.36; // Assuming a 36% back-end DTI ratio
var maxMonthlyDebtPayment = grossMonthlyIncome * maxTotalDebtRatio;
var maxMortgagePayment = maxMonthlyDebtPayment – monthlyDebt;
// Ensure maxMortgagePayment is not negative
if (maxMortgagePayment 0 && numberOfPayments > 0) {
// Calculate maximum loan amount using the mortgage payment formula rearranged
// 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) {
maxLoanAmount = maxMortgagePayment * (numerator / denominator);
}
} else if (monthlyInterestRate === 0 && numberOfPayments > 0) {
// Handle 0% interest rate case (though unlikely for mortgages)
maxLoanAmount = maxMortgagePayment * numberOfPayments;
}
var affordableHomePrice = maxLoanAmount + downPayment;
document.getElementById("maxMortgage").textContent = "$" + maxMortgagePayment.toFixed(2);
document.getElementById("affordableHomePrice").textContent = "Estimated Affordable Home Price: $" + affordableHomePrice.toFixed(2);
}