Use this calculator to estimate how much house you can afford based on your income, debts, and desired mortgage terms.
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 resultDiv = document.getElementById("result");
resultDiv.innerHTML = "; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTermYears) ||
annualIncome < 0 || monthlyDebtPayments < 0 || downPayment < 0 || interestRate < 0 || loanTermYears <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Lender's front-end ratio: typically 28% of gross monthly income
var maxMonthlyPITI_FrontEnd = annualIncome / 12 * 0.28;
// Lender's back-end ratio: typically 36% of gross monthly income minus monthly debts
var maxMonthlyPITI_BackEnd = (annualIncome / 12 * 0.36) – monthlyDebtPayments;
// The lower of the two ratios usually dictates the maximum housing payment
var maxMonthlyPITI = Math.min(maxMonthlyPITI_FrontEnd, maxMonthlyPITI_BackEnd);
if (maxMonthlyPITI 0) {
maxLoanAmount = maxMonthlyPITI * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
} else {
// Handle zero interest rate case (though unlikely for mortgages)
maxLoanAmount = maxMonthlyPITI * numberOfPayments;
}
// Assuming taxes and insurance (TI) are a portion of the monthly payment.
// A common estimate is 1% of the home value annually, or roughly 0.0833% of home value monthly.
// For simplicity, we'll estimate TI as a percentage of the loan amount, or a fixed amount.
// A more accurate calculator would ask for estimated property taxes and homeowner's insurance.
// Let's estimate TI as 0.1% of the loan amount per month for illustrative purposes.
var estimatedMonthlyTI = maxLoanAmount * 0.001; // 0.1% of loan amount as an estimate for Taxes & Insurance
// Calculate the total house price affordability
var affordableHousePrice = maxLoanAmount + downPayment;
// Recalculate max monthly PITI if estimated TI is too high
var maxMonthlyPrincipalAndInterest = maxMonthlyPITI – estimatedMonthlyTI;
if (maxMonthlyPrincipalAndInterest 0) {
maxLoanAmount = maxMonthlyPrincipalAndInterest * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
} else {
maxLoanAmount = maxMonthlyPrincipalAndInterest * numberOfPayments;
}
affordableHousePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML = `
Estimated Maximum House Price You Can Afford: $${affordableHousePrice.toFixed(2)}
Breakdown:
Maximum Monthly Housing Payment (PITI): $${maxMonthlyPITI.toFixed(2)}
Estimated Monthly Principal & Interest (P&I): $${maxMonthlyPrincipalAndInterest.toFixed(2)}
Estimated Monthly Property Taxes & Homeowner's Insurance (TI): $${estimatedMonthlyTI.toFixed(2)} (This is an estimate and can vary significantly)
Determining how much house you can afford is a crucial step in the home-buying process. It's not just about finding a house you like; it's about finding a house that fits comfortably within your financial means. Lenders use several metrics to assess your borrowing capacity, and understanding these can help you set realistic expectations.
Key Factors Lenders Consider:
Gross Monthly Income: This is your total income before taxes and other deductions. Lenders use this as the base for their affordability calculations.
Existing Monthly Debt Payments: This includes payments for car loans, student loans, credit cards, personal loans, and any other recurring debts. These are important because they affect how much of your income is already committed.
Down Payment: The amount of cash you put towards the purchase price upfront. A larger down payment reduces the loan amount needed, making the mortgage more affordable and potentially securing better interest rates.
Interest Rate: The annual interest rate charged on the mortgage loan. Even small differences in interest rates can significantly impact your monthly payments 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 or 30 years). A shorter term means higher monthly payments but less interest paid overall. A longer term means lower monthly payments but more interest paid over time.
Lender Ratios Explained:
Lenders often use two primary ratios to determine how much they are willing to lend you:
Front-End Ratio (Housing Ratio): This ratio compares your potential total monthly housing payment (Principal, Interest, Property Taxes, and Homeowner's Insurance – often called PITI) to your gross monthly income. A common guideline is that PITI should not exceed 28% of your gross monthly income.
Back-End Ratio (Debt-to-Income Ratio): This ratio compares your total monthly debt payments (including the potential PITI) to your gross monthly income. Lenders typically want this ratio to be no more than 36% of your gross monthly income, though this can vary.
The calculator above uses these principles to estimate your affordable home price. It calculates the maximum monthly PITI you can afford based on both the front-end and back-end ratios, taking the lower, more conservative figure. It then estimates the loan amount you could qualify for based on that maximum PITI, interest rate, and loan term. Finally, it adds your down payment to this loan amount to arrive at an estimated maximum affordable home price.
Important Note: This calculator provides an estimate. Property taxes and homeowner's insurance can vary widely by location and property type. Your actual loan approval amount will depend on a thorough review of your financial situation by a mortgage lender.