Mortgage Affordability Calculator
Understanding Mortgage Affordability
Determining how much house you can afford is a crucial step in the home-buying process. Lenders typically use several factors to assess your ability to repay a mortgage loan. This calculator helps you estimate your potential borrowing power based on common lending guidelines.
Key Factors in Mortgage Affordability:
- Annual Income: Your total earnings before taxes. Lenders want to see a stable and sufficient income to cover mortgage payments.
- Monthly Debt Payments: This includes existing obligations like car loans, student loans, and credit card minimum payments. High existing debt can reduce your borrowing capacity.
- Down Payment: The amount of money you pay upfront towards the purchase price. A larger down payment reduces the loan amount needed and can improve your chances of approval and interest rate.
- Interest Rate: The percentage charged by the lender on the loan amount. A lower interest rate means lower monthly payments and a more affordable loan.
- Loan Term: The duration over which you will repay the mortgage, typically 15, 20, or 30 years. Shorter terms result in higher monthly payments but less interest paid over time.
How the Calculator Works:
This calculator uses a common rule of thumb employed by lenders: the debt-to-income ratio (DTI). While lenders consider various DTI thresholds (often around 28% for housing costs and 36-43% for total debt), this calculator provides an estimate based on a simplified approach. It estimates the maximum monthly mortgage payment you might afford by considering your income and existing debts, then calculates the loan amount you could borrow based on that payment, the interest rate, and loan term.
Disclaimer: This calculator is for informational purposes only and does not constitute financial advice. Your actual mortgage affordability may vary depending on the specific lender, your credit score, market conditions, and other factors.
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function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value) / 100;
var loanTermYears = parseInt(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0) {
resultDiv.innerHTML = "Please enter a valid Annual Income.";
return;
}
if (isNaN(monthlyDebt) || monthlyDebt < 0) {
resultDiv.innerHTML = "Please enter a valid Total Monthly Debt Payments.";
return;
}
if (isNaN(downPayment) || downPayment < 0) {
resultDiv.innerHTML = "Please enter a valid Down Payment amount.";
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
resultDiv.innerHTML = "Please enter a valid Annual Interest Rate.";
return;
}
if (isNaN(loanTermYears) || loanTermYears <= 0) {
resultDiv.innerHTML = "Please enter a valid Loan Term in Years.";
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.
// We'll use this to estimate maximum P&I payment.
var maxMonthlyHousingPayment = monthlyIncome * 0.28;
// Another guideline is that total debt (including housing) should not exceed 36% of gross monthly income.
// This gives us a more conservative estimate for the total P&I payment.
var maxTotalMonthlyDebtPayment = monthlyIncome * 0.36;
var maxPrincipalInterestPaymentFromTotalDebt = maxTotalMonthlyDebtPayment – monthlyDebt;
// The more restrictive of the two is usually the determining factor.
var affordableMonthlyPrincipalInterest = Math.min(maxMonthlyHousingPayment, maxPrincipalInterestPaymentFromTotalDebt);
if (affordableMonthlyPrincipalInterest 0) {
principalLoanAmount = affordableMonthlyPrincipalInterest * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
} else {
// If interest rate is 0, P = M * n
principalLoanAmount = affordableMonthlyPrincipalInterest * numberOfPayments;
}
// The maximum affordable home price is the loan amount plus the down payment.
var maxHomePrice = principalLoanAmount + downPayment;
// Format results
var formattedLoanAmount = principalLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxHomePrice = maxHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMonthlyPrincipalInterest = affordableMonthlyPrincipalInterest.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = "
Your Estimated Affordability:
" +
"Estimated Maximum Loan Amount:
" + formattedLoanAmount + "" +
"Estimated Maximum Home Price (with your down payment):
" + formattedMaxHomePrice + "" +
"(Based on estimated principal & interest payment of " + formattedMonthlyPrincipalInterest + "/month)";
}