This calculator provides an estimate of how much you might qualify for. Actual loan approval depends on many factors, including lender specifics, credit score, employment history, and down payment.
Your estimated maximum loan qualification: $0
Understanding Your Mortgage Qualification
Determining how much mortgage you might qualify for is a crucial first step in the home-buying process. Lenders use various factors to assess your ability to repay a loan, primarily focusing on your income, existing debts, and the potential new mortgage payment. This calculator provides a simplified estimate based on common lending guidelines.
Key Factors for Mortgage Qualification:
Gross Monthly Income: This is your total income before taxes and other deductions. Lenders typically look at your ability to handle a mortgage payment relative to this income.
Existing Monthly Debt Payments: This includes payments for credit cards, auto loans, student loans, personal loans, and any other recurring obligations. These are summed up to determine your existing financial commitments.
Down Payment: A larger down payment reduces the loan amount needed and can improve your chances of approval and secure better loan terms.
Credit Score: While not directly in this calculator, your credit score significantly impacts your interest rate and loan approval. Higher scores generally lead to lower rates and better qualification.
Debt-to-Income Ratio (DTI): This is a critical metric. Lenders use two types of DTI:
Front-End DTI (Housing Ratio): The percentage of your gross monthly income that would go towards your new mortgage payment (principal, interest, taxes, and insurance – PITI). A common guideline is not to exceed 28%.
Back-End DTI (Total Debt Ratio): The percentage of your gross monthly income that would go towards all your monthly debt payments, including the new mortgage PITI. A common guideline is not to exceed 36%, though this can vary.
Loan Term and Interest Rate: These directly affect your monthly payment amount.
How the Calculator Works:
This calculator uses a simplified approach to estimate your qualification by working backward from common DTI limits.
Calculate Gross Monthly Income: Your annual income is divided by 12.
Calculate Allowable Monthly Debt: Based on a common back-end DTI ratio (e.g., 36% of gross monthly income), it determines the maximum total monthly debt you can have.
Determine Maximum Mortgage Payment: Your existing monthly debt payments are subtracted from the allowable total monthly debt to find out how much can be allocated to a new mortgage payment (P&I only, for simplicity).
Estimate Maximum Loan Amount: Using the estimated maximum monthly mortgage payment, the interest rate, and the loan term, the calculator computes the principal loan amount you could afford. This uses a standard mortgage payment formula.
Formula for Mortgage Payment (M):
$M = P \frac{r(1+r)^n}{(1+r)^n – 1}$
Where:
P = Principal loan amount (what we're solving for)
n = Total number of payments (Loan term in years * 12)
Rearranging to solve for P:
$P = M \frac{(1+r)^n – 1}{r(1+r)^n}$
Important Note: This calculation excludes property taxes, homeowner's insurance, and potentially Private Mortgage Insurance (PMI), which are critical components of your actual monthly housing cost (PITI). Lenders will factor these in, often adhering to the 28% front-end DTI. Therefore, the amount calculated here is likely an overestimate of the actual mortgage payment you'll be approved for when considering all costs.
For a more precise estimate, consult with a mortgage professional and factor in all estimated housing expenses.
function calculateMortgageQualify() {
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);
// Basic validation for inputs
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
document.getElementById("result").innerHTML = 'Please enter valid positive numbers for all fields.';
return;
}
// — Calculation Logic —
// Using common DTI guidelines
var maxFrontEndDTIRatio = 0.28; // Front-end DTI for housing expenses
var maxBackEndDTIRatio = 0.36; // Back-end DTI for total debt
var grossMonthlyIncome = annualIncome / 12;
// Estimate maximum allowable total monthly debt payments
var maxTotalMonthlyDebt = grossMonthlyIncome * maxBackEndDTIRatio;
// Calculate how much is left for a potential mortgage payment (P&I only)
var maxMortgagePaymentPAndI = maxTotalMonthlyDebt – monthlyDebt;
// Ensure maxMortgagePaymentPAndI is not negative
if (maxMortgagePaymentPAndI 0 && numberOfPayments > 0) {
// Calculate the maximum loan amount based on the max mortgage payment (P&I)
// Formula derived from the mortgage payment formula: P = M * [1 – (1 + r)^-n] / r
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
if (denominator > 0) {
maxLoanAmount = maxMortgagePaymentPAndI * (numerator / denominator);
} else {
maxLoanAmount = 0; // Handle cases where denominator might be zero
}
} else if (monthlyInterestRate === 0 && numberOfPayments > 0) {
// If interest rate is 0, loan amount is simply payment * number of payments
maxLoanAmount = maxMortgagePaymentPAndI * numberOfPayments;
}
// The result is the maximum loan amount the borrower can afford.
// The down payment is separate and doesn't directly factor into *qualification amount* based on DTI,
// but it affects the total home price one can afford. This calculator focuses on the loan amount qualification.
var formattedMaxLoanAmount = maxLoanAmount.toFixed(2);
document.getElementById("result").innerHTML = 'Your estimated maximum loan qualification: $' + formattedMaxLoanAmount.replace(/\B(?=(\d{3})+(?!\d))/g, ",") + '';
}