Your Estimated Mortgage Affordability
Enter your details above to see your estimated affordable mortgage amount.
Understanding Mortgage Affordability
Determining how much mortgage you can afford is a crucial step in the home-buying process. It helps you set realistic expectations and avoid financial strain. Several factors influence this calculation, and lenders use various metrics to assess your borrowing capacity. This calculator provides an estimate based on common lending guidelines.
Key Factors in Mortgage Affordability:
- Annual Household Income: This is the primary driver of affordability. Lenders want to see a stable income stream sufficient to cover loan payments.
- Monthly Debt Payments: Existing financial obligations such as car loans, student loans, and credit card payments reduce the amount of income available for a mortgage. The lower your existing debt, the more you can potentially borrow.
- Down Payment: A larger down payment reduces the loan amount needed, thereby lowering your monthly payments and making a property more affordable. It also signifies a lower risk to the lender.
- Interest Rate: The annual interest rate significantly impacts your monthly payment and the total cost of the loan. Even a small difference in interest rates can lead to substantial savings or costs over the life of the loan.
- Loan Term: The duration of the mortgage (e.g., 15, 20, or 30 years) affects the monthly payment. Shorter terms generally mean higher monthly payments but less interest paid overall.
- Debt-to-Income Ratio (DTI): Lenders often use DTI to assess affordability. This ratio compares your total monthly debt obligations (including the potential mortgage payment) to your gross monthly income. A common guideline is that your total DTI should not exceed 43%.
How This Calculator Works:
This calculator estimates your maximum affordable mortgage by considering your income and existing debts. It applies common lending principles, often looking at the "front-end" and "back-end" DTI ratios. While this calculator provides a good estimate, it's essential to remember that final mortgage approval depends on a lender's specific underwriting criteria, credit score, employment history, and other financial details.
Disclaimer: This calculator is for estimation purposes only and does not constitute financial advice. Consult with a mortgage professional for personalized guidance.
Example:
Let's say a couple has an annual household income of $120,000. They have total monthly debt payments (student loans and car payment) of $800. They plan to make a down payment of $60,000. They are considering a mortgage with an estimated annual interest rate of 6.8% for a loan term of 30 years.
Based on these inputs, the calculator will estimate the maximum mortgage amount they could potentially afford, helping them understand the price range of homes they can realistically consider.
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);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) ||
annualIncome <= 0 || monthlyDebt < 0 || downPayment < 0 || interestRate <= 0 || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var monthlyIncome = annualIncome / 12;
// A common guideline is that total housing costs (PITI – Principal, Interest, Taxes, Insurance) should not exceed 28% of gross monthly income.
// And total debt obligations (including housing) should not exceed 36% of gross monthly income.
// We'll use a slightly more generous back-end DTI for estimation purposes, around 43%, but still capping at 28% for P&I alone.
var maxHousingPayment_frontEnd = monthlyIncome * 0.28; // Principal & Interest portion
var maxTotalDebtPayment_backEnd = monthlyIncome * 0.43; // Including PITI, taxes, insurance and existing debts
var maxMonthlyMortgagePayment = Math.min(maxHousingPayment_frontEnd, maxTotalDebtPayment_backEnd – monthlyDebt);
if (maxMonthlyMortgagePayment <= 0) {
resultDiv.innerHTML = "Based on your inputs, your current debt load might make it difficult to qualify for a new mortgage. Consider reducing debt or increasing income.";
return;
}
// Mortgage payment formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where:
// M = monthly payment
// P = principal loan amount
// i = monthly interest rate
// n = total number of payments (loan term in years * 12)
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// We need to solve for P (principal loan amount)
// P = M * [ (1 + i)^n – 1] / [ i(1 + i)^n ]
// Avoid division by zero if monthlyInterestRate is effectively zero
var principal;
if (monthlyInterestRate === 0) {
principal = maxMonthlyMortgagePayment * numberOfPayments;
} else {
principal = maxMonthlyMortgagePayment * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
}
// The calculated principal is the maximum loan amount.
// The total affordable home price is the loan amount plus the down payment.
var affordableHomePrice = principal + downPayment;
// Format results for clarity
var formattedAffordableHomePrice = affordableHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedPrincipal = principal.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxMonthlyMortgagePayment = maxMonthlyMortgagePayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = `
Estimated Maximum Affordable Home Price: ${formattedAffordableHomePrice}
(This includes your down payment of ${downPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' })})
Estimated Maximum Loan Amount: ${formattedPrincipal}
Estimated Maximum Monthly Mortgage Payment (Principal & Interest): ${formattedMaxMonthlyMortgagePayment}
Note: This estimate does not include property taxes, homeowner's insurance, or potential Private Mortgage Insurance (PMI), which will increase your actual monthly housing costs.
`;
}