Use this calculator to estimate how much house you can afford based on your income, debts, and down payment. Understanding your borrowing power is a crucial first step in the home-buying process.
How Mortgage Affordability is Calculated
This calculator provides an estimate of your maximum affordable home price. It considers several key factors:
Annual Household Income: This is your total gross income before taxes. Lenders often use a Debt-to-Income (DTI) ratio to assess your ability to repay a loan. A common guideline is that your total monthly debt payments (including the potential mortgage) should not exceed 36-43% of your gross monthly income.
Total Monthly Debt Payments: This includes existing loan payments (car loans, student loans, credit card minimums, etc.), but generally excludes utilities and everyday living expenses.
Down Payment: The upfront cash you pay towards the home purchase. A larger down payment reduces the loan amount needed and can positively impact your loan terms.
Interest Rate: The annual interest rate on the mortgage. Higher rates mean higher monthly payments for the same loan amount.
Loan Term: The duration of the mortgage, typically 15 or 30 years. Longer terms result in lower monthly payments but more interest paid over the life of the loan.
The Calculation Logic (Simplified):
1. Maximum P&I Payment: We estimate the maximum monthly principal and interest (P&I) payment you can afford by calculating your allowable debt based on your income (using a common DTI threshold, e.g., 36%) and subtracting your existing monthly debts.
2. Loan Amount Estimation: Using the estimated maximum monthly P&I payment, the interest rate, and the loan term, we calculate the maximum loan amount you could borrow using the standard mortgage payment formula.
3. Maximum Home Price: Finally, we add your down payment to the estimated maximum loan amount to arrive at an estimated maximum affordable home price.
Disclaimer: This calculator provides an estimate only. Actual loan approval and affordability will depend on the specific lender's underwriting criteria, your credit score, and other financial factors.
Example Calculation:
Let's say you have:
Annual Household Income: $90,000
Total Monthly Debt Payments: $600 (car payment, student loan)
Down Payment: $30,000
Estimated Mortgage Interest Rate: 6.0%
Mortgage Loan Term: 30 years
Step 1: Maximum P&I Payment Calculation
Gross Monthly Income: $90,000 / 12 = $7,500
Assuming a 36% DTI for P&I: $7,500 * 0.36 = $2,700
Using a mortgage calculator formula with a $2,100 monthly payment, 6.0% interest rate, and 30-year term, the estimated maximum loan amount is approximately $350,188.
Step 3: Maximum Home Price Estimation
Maximum Home Price = $350,188 (Loan Amount) + $30,000 (Down Payment) = $380,188
In this example, you might be able to afford a home priced around $380,188.
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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");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Assuming a maximum DTI of 36% for P&I payment calculation
var maxDTI = 0.36; // 36%
var grossMonthlyIncome = annualIncome / 12;
var maxTotalDebtPayment = grossMonthlyIncome * maxDTI;
var maxPIPayment = maxTotalDebtPayment – monthlyDebt;
if (maxPIPayment <= 0) {
resultDiv.innerHTML = "Based on your income and existing debts, you may not qualify for an additional mortgage payment.";
return;
}
// Mortgage payment formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where:
// M = Monthly Payment (maxPIPayment)
// P = Principal Loan Amount (what we need to solve for)
// i = monthly interest rate (annualRate / 12)
// n = total number of payments (loanTerm * 12)
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// Rearrange formula to solve for P: P = M * [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var principalLoanAmount = maxPIPayment * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
var estimatedMaxHomePrice = principalLoanAmount + downPayment;
// Format the results
var formattedMaxHomePrice = estimatedMaxHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedPrincipalLoanAmount = principalLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxPIPayment = maxPIPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedGrossMonthlyIncome = grossMonthlyIncome.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = "
Estimated Affordability Results:
" +
"Estimated Maximum Affordable Home Price: " + formattedMaxHomePrice + "" +
"Estimated Maximum Loan Amount: " + formattedPrincipalLoanAmount + "" +
"Estimated Maximum Monthly Principal & Interest Payment: " + formattedMaxPIPayment + "" +
"(Based on a maximum 36% DTI including existing debts. Assumes Gross Monthly Income of " + formattedGrossMonthlyIncome + ")";
}