Buying a home is one of the biggest financial decisions you'll ever make. Determining how much you can realistically afford for a mortgage is a crucial first step. This mortgage affordability calculator helps you estimate the maximum loan amount you might qualify for, considering your income, existing debts, and potential mortgage terms.
Key Factors Influencing Affordability:
Annual Household Income: This is the primary driver of your borrowing capacity. Lenders assess your ability to repay based on your consistent income.
Monthly Debt Payments: Lenders look at your Debt-to-Income (DTI) ratio, which compares your total monthly debt obligations to your gross monthly income. High existing debts can significantly reduce the amount you can borrow for a mortgage. Common debts include car loans, student loans, and credit card payments.
Down Payment: A larger down payment reduces the loan amount you need, lowers your loan-to-value (LTV) ratio, and can often lead to better interest rates and lower private mortgage insurance (PMI) costs.
Interest Rate: Even small changes in interest rates can have a substantial impact on your monthly payments and the total interest paid over the life of the loan. Higher interest rates mean a higher monthly payment for the same loan amount.
Loan Term: Mortgages are typically offered with terms of 15, 20, or 30 years. Shorter terms result in higher monthly payments but less interest paid overall. Longer terms mean lower monthly payments but more interest paid over time.
How the Calculator Works:
This calculator uses common lending guidelines to estimate your affordability. A widely used benchmark for the total housing expense (including principal, interest, property taxes, and homeowners insurance – often called PITI) is that it should not exceed 28% of your gross monthly income. Additionally, your total debt obligations (including the estimated PITI) should not exceed 36% of your gross monthly income (this is the gross DTI).
The calculator first determines your maximum allowable monthly mortgage payment based on these DTI ratios, considering your income and existing monthly debts. It then uses a standard mortgage payment formula (amortization) to work backward from this maximum monthly payment to estimate the maximum loan amount you could borrow, given your desired interest rate and loan term. Remember, this is an estimate, and actual lender approval may vary based on their specific underwriting criteria, credit score, and other factors.
function calculateAffordability() {
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) / 100; // Convert percentage to decimal
var loanTerm = parseInt(document.getElementById("loanTerm").value); // Years
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0) {
resultDiv.innerHTML = "Please enter a valid annual household income.";
return;
}
if (isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0) {
resultDiv.innerHTML = "Please enter a valid total monthly debt payment amount.";
return;
}
if (isNaN(downPayment) || downPayment < 0) {
resultDiv.innerHTML = "Please enter a valid down payment amount.";
return;
}
if (isNaN(interestRate) || interestRate < 0) {
resultDiv.innerHTML = "Please enter a valid estimated mortgage interest rate.";
return;
}
if (isNaN(loanTerm) || loanTerm maxPITI) {
maxMonthlyMortgagePayment_PI = maxPITI;
}
// If the calculated max monthly payment is negative or zero, it means existing debts are too high.
if (maxMonthlyMortgagePayment_PI 0 && numberOfPayments > 0) {
var numerator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
var denominator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
if (denominator > 0) {
maxLoanAmount = maxMonthlyMortgagePayment_PI * (denominator / numerator);
}
} else if (monthlyInterestRate === 0 && numberOfPayments > 0) {
// Special case: 0% interest rate
maxLoanAmount = maxMonthlyMortgagePayment_PI * numberOfPayments;
}
// 6. Calculate Estimated Total Home Price
var estimatedTotalHomePrice = maxLoanAmount + downPayment;
// — Display Results —
resultDiv.innerHTML =
"Estimated Maximum Loan Amount: $" + maxLoanAmount.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "" +
"Estimated Maximum Affordable Home Price: $" + estimatedTotalHomePrice.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",") + "" +
"Note: This is an estimate. Actual affordability depends on lender approval, credit score, property taxes, homeowner's insurance, PMI, and other factors. Assumes PITI does not exceed 28% of gross monthly income and total debt (including PITI) does not exceed 36% of gross monthly income.";
}
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