Use this calculator to estimate how much house you can afford based on your income, debts, and down payment. This is a crucial step when planning your home purchase.
Your Estimated Maximum Home Price:
$0.00
Your Estimated Maximum Monthly Mortgage Payment (PITI):
$0.00
Note: This is an estimate. Consult with a mortgage lender for precise figures. PITI stands for Principal, Interest, Taxes, and Insurance.
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function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var propertyTaxRate = parseFloat(document.getElementById("propertyTaxRate").value);
var homeInsurance = parseFloat(document.getElementById("homeInsurance").value);
var pmiRate = parseFloat(document.getElementById("privateMortgageInsurance").value);
var maxHomePriceResultElement = document.getElementById("maxHomePriceResult");
var maxMonthlyPaymentResultElement = document.getElementById("maxMonthlyPaymentResult");
// Reset previous results
maxHomePriceResultElement.innerText = "$0.00";
maxMonthlyPaymentResultElement.innerText = "$0.00";
// Input validation
if (isNaN(annualIncome) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTermYears) || isNaN(propertyTaxRate) || isNaN(homeInsurance) || isNaN(pmiRate)) {
alert("Please enter valid numbers for all fields.");
return;
}
if (annualIncome <= 0 || monthlyDebtPayments < 0 || downPayment < 0 || interestRate < 0 || loanTermYears <= 0 || propertyTaxRate < 0 || homeInsurance < 0 || pmiRate < 0) {
alert("Please enter positive values where applicable.");
return;
}
// — Affordability Calculation Logic —
// General rule of thumb: Front-end ratio (housing costs) should not exceed 28% of gross monthly income.
// Back-end ratio (total debt including housing) should not exceed 36% of gross monthly income.
// We'll calculate based on the stricter of these two, and then determine the maximum loan amount.
var grossMonthlyIncome = annualIncome / 12;
// Maximum allowable monthly housing payment (PITI) based on 28% rule
var maxHousingPaymentFrontEnd = grossMonthlyIncome * 0.28;
// Maximum allowable total monthly debt payments (including PITI) based on 36% rule
var maxTotalDebtBackEnd = grossMonthlyIncome * 0.36;
// Maximum allowable PITI considering total debt limit
var maxHousingPaymentBackEnd = maxTotalDebtBackEnd – monthlyDebtPayments;
// The actual maximum monthly housing payment (PITI) is the lower of the two limits
var maxMonthlyPITI = Math.min(maxHousingPaymentFrontEnd, maxHousingPaymentBackEnd);
// If maxMonthlyPITI is negative, it means current debts exceed the 36% threshold, so affordability is $0.
if (maxMonthlyPITI estimatedMonthlyExpenses) {
// A very crude estimate of loan amount based on the remaining portion of maxMonthlyPITI.
// This helps narrow down the search space for the iterative approach.
var remainingForLoan = maxMonthlyPITI – estimatedMonthlyExpenses;
if (remainingForLoan > 0) {
// Formula for loan payment: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Rearranging for P: P = M [ (1 + i)^n – 1] / i(1 + i)^n
var estimatedPrincipal = remainingForLoan * (Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths));
currentLoanAmountGuess = Math.max(10000, estimatedPrincipal * 0.8); // Start guess slightly lower
}
}
for (var i = 0; i < maxIterations; i++) {
var estimatedMonthlyTaxes = (currentLoanAmountGuess * (propertyTaxRate / 100)) / 12;
var estimatedMonthlyInsurance = homeInsurance / 12;
var estimatedMonthlyPMI = (currentLoanAmountGuess * (pmiRate / 100)) / 12;
var totalMonthlyHousingCostsWithoutPrincipalInterest = estimatedMonthlyTaxes + estimatedMonthlyInsurance + estimatedMonthlyPMI;
if (maxMonthlyPITI 0) {
maxLoanAmount = loanAmount; // Update max loan amount found so far
}
// Adjust guess for next iteration if needed (this is a simplification, actual root-finding is complex)
// For simplicity, we'll assume we found a reasonable loan amount if the calculation is close.
// A more robust approach would involve a binary search or Newton-Raphson method.
// Given the constraints, we'll aim for the closest possible loan amount based on the max PITI.
// The iterative process above effectively tries to find the loan amount that fits within maxMonthlyPITI.
// If maxMonthlyPITI is achievable, then maxLoanAmount will be set.
break; // Exit loop once we have a loan amount derived from maxMonthlyPITI
}
var maxHomePrice = maxLoanAmount + downPayment;
// Format results
maxHomePriceResultElement.innerText = "$" + maxHomePrice.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
maxMonthlyPaymentResultElement.innerText = "$" + maxMonthlyPITI.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}
Understanding Mortgage Affordability
Dreaming of owning a home is exciting, but understanding how much you can realistically afford is the first and most critical step. A mortgage affordability calculator helps you estimate this by considering your financial situation against lender requirements and the costs associated with homeownership.
Key Factors in Affordability Calculations:
Annual Gross Income: This is your total income before taxes and deductions. Lenders use this to gauge your ability to repay the loan.
Monthly Debt Payments: This includes all your existing recurring debts like car loans, student loans, and credit card minimum payments. Lenders want to ensure your new mortgage payment won't overwhelm your budget.
Down Payment: The upfront cash you contribute towards the home purchase. A larger down payment reduces the loan amount needed, lowers your monthly payments, and can help you avoid Private Mortgage Insurance (PMI).
Interest Rate: The percentage charged by the lender for borrowing money. Even a small difference in interest rates can significantly impact your monthly payment and the total interest paid over the life of the loan.
Loan Term: The number of years you have to repay the mortgage (commonly 15, 20, or 30 years). Shorter terms mean higher monthly payments but less interest paid overall.
Property Taxes: Annual taxes levied by local governments on your property's value. These are typically paid monthly as part of your mortgage payment (escrow).
Homeowners Insurance: Protects your home against damage from events like fire, theft, or natural disasters. This is also usually paid monthly via escrow.
Private Mortgage Insurance (PMI): Required by lenders if your down payment is less than 20% of the home's purchase price. It protects the lender, not you. PMI is usually a percentage of the loan amount annually, paid monthly.
How the Calculator Works:
This calculator estimates your affordability based on common lender guidelines, typically using two main ratios:
Front-End Ratio (Housing Ratio): This ratio compares your potential total monthly housing costs (Principal, Interest, Taxes, and Insurance – PITI) to your gross monthly income. Lenders often prefer this to be no more than 28% of your gross monthly income.
Back-End Ratio (Debt-to-Income Ratio): This ratio compares your total monthly debt obligations (including the estimated PITI) to your gross monthly income. Lenders often aim for this to be no more than 36% of your gross monthly income, though this can vary.
The calculator determines the maximum monthly PITI you can afford based on the stricter of these two ratios. It then works backward to estimate the largest loan amount you could qualify for, considering the interest rate, loan term, property taxes, insurance, and PMI. Finally, it adds your down payment to this loan amount to estimate your maximum affordable home price.
Example Scenario:
Let's consider Sarah, who is looking to buy her first home.
Her Annual Gross Income is $80,000.
Her Total Monthly Debt Payments (car loan, student loan) are $500.
She has saved a Down Payment of $20,000.
She estimates a Mortgage Interest Rate of 6.5%.
She is considering a 30-year Loan Term.
She estimates Annual Property Taxes at 1.2% of the home value and Annual Homeowners Insurance at $1,200.
She expects to pay PMI at 0.5% of the loan amount annually (since her down payment is less than 20%).
After entering these details into the calculator:
Her Gross Monthly Income is $80,000 / 12 = $6,666.67.
The calculator might suggest a maximum monthly PITI of around $2,200 (based on the 28% front-end ratio).
It then factors in estimated taxes, insurance, and PMI, working backward to find the maximum loan amount that fits within the PITI limit and the 36% back-end ratio (considering her $500 existing debt).
Suppose the calculation suggests a maximum loan amount of approximately $250,000.
Adding her $20,000 down payment, Sarah's Estimated Maximum Home Price would be around $270,000.
Her Estimated Maximum Monthly Mortgage Payment (PITI) might be calculated to be around $2,150.
This estimate gives Sarah a solid starting point for her home search. It's important to remember that this is an estimate; a pre-approval from a mortgage lender will provide a more precise figure based on a full review of her credit and finances.