Determining how much mortgage you can afford is a critical step in the home-buying process. It helps you set realistic expectations and focus your property search. Lenders assess your ability to repay a loan based on several factors, primarily your income, existing debts, and the proposed mortgage payment. This calculator provides an estimate based on common lending guidelines.
How the Calculator Works:
This calculator uses two common debt-to-income (DTI) ratios that lenders often consider:
Front-End DTI (Housing Ratio): This ratio typically looks at your proposed housing costs (principal, interest, property taxes, homeowner's insurance – often called PITI) and compares them to your gross monthly income. Lenders often prefer this to be below 28%.
Back-End DTI (Total Debt Ratio): This ratio includes all your monthly debt obligations – your proposed housing costs (PITI) plus all other recurring monthly debts like car loans, student loans, and credit card minimum payments – and compares them to your gross monthly income. Lenders generally prefer this to be below 36%, though it can go up to 43% or even higher in some cases with strong compensating factors.
Our calculator works backward: it estimates the maximum monthly payment you can afford based on these DTI ratios and then calculates the maximum loan amount that payment can support, considering your down payment.
Simplified Calculation Logic:
1. Calculate Maximum Housing Payment:
* Maximum Housing Payment (Front-End DTI) = Gross Monthly Income * 0.28 (or 28%)
* Maximum Total Debt Payment (Back-End DTI) = Gross Monthly Income * 0.36 (or 36%)
* Allowable Monthly Mortgage Payment = Maximum Total Debt Payment – Existing Monthly Debt Payments.
* The *lower* of the two maximum housing payments derived from Front-End and Back-End DTI dictates your affordability. We prioritize the Back-End DTI limit as it's more comprehensive.
2. Calculate Maximum Loan Amount:
The calculator then uses a standard mortgage payment formula (M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]) rearranged to solve for P (Principal Loan Amount). It determines the largest principal amount that the allowable monthly mortgage payment can service, given the interest rate and loan term.
* Formula for Monthly Payment (M): M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
* Where:
* P = Principal loan amount
* i = Monthly interest rate (Annual Rate / 12 / 100)
* n = Total number of payments (Loan Term in Years * 12)
* The calculator solves for P, effectively: P = M * [ (1 + i)^n – 1] / [ i(1 + i)^n ]
3. Add Down Payment:
The estimated maximum mortgage amount is added to your available down payment to give you an idea of the total home price you might be able to afford.
Important Considerations:
Property Taxes & Insurance: This calculator provides an estimate and does not include fluctuating costs like property taxes and homeowner's insurance (PITI). Lenders will factor these in, and they can significantly impact your actual monthly payment and affordability.
PMI/MIP: If your down payment is less than 20%, you may have to pay Private Mortgage Insurance (PMI) or Mortgage Insurance Premium (MIP), adding to your monthly cost.
HOA Fees: If the property has a Homeowners Association, these fees are additional monthly costs.
Lender Specifics: DTI thresholds and other qualifying criteria vary by lender and loan program (e.g., FHA, VA, Conventional).
Credit Score: A higher credit score generally leads to better interest rates and potentially higher borrowing limits.
Closing Costs: Remember to budget for closing costs, which are separate from your down payment.
Disclaimer: This calculator is for estimation purposes only and does not constitute a loan approval or financial advice. Consult with a qualified mortgage professional for personalized advice.
function calculateMortgageAffordability() {
var monthlyIncome = parseFloat(document.getElementById("monthlyIncome").value);
var existingDebt = parseFloat(document.getElementById("existingDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var resultValueElement = document.getElementById("result-value");
if (isNaN(monthlyIncome) || monthlyIncome <= 0 ||
isNaN(existingDebt) || existingDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
resultValueElement.innerText = "Invalid Input";
return;
}
// Standard DTI ratios
var maxFrontEndDTI = 0.28; // 28% for housing costs only
var maxBackEndDTI = 0.36; // 36% for all debt including housing
// Calculate maximum affordable monthly housing payment based on Back-End DTI
var maxTotalDebtPayment = monthlyIncome * maxBackEndDTI;
var maxMonthlyMortgagePayment = maxTotalDebtPayment – existingDebt;
// Ensure the calculated mortgage payment is not negative
if (maxMonthlyMortgagePayment 0 && numberOfPayments > 0) {
var factor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
maxLoanAmount = maxMonthlyMortgagePayment * (factor – 1) / monthlyInterestRate / factor;
} else if (monthlyInterestRate === 0 && numberOfPayments > 0) {
// Handle zero interest rate case (simple division)
maxLoanAmount = maxMonthlyMortgagePayment * numberOfPayments;
}
// If monthlyInterestRate or numberOfPayments is 0 or invalid, maxLoanAmount remains 0.
// Check against Front-End DTI as well, though Back-End is usually more limiting.
// We can use this to refine or provide context, but for simplicity, we'll primarily rely on the Back-End DTI calculation for the max loan.
// If we wanted to strictly enforce both:
// var maxHousingPaymentFrontEnd = monthlyIncome * maxFrontEndDTI;
// var affordableMortgagePayment = Math.min(maxMonthlyMortgagePayment, maxHousingPaymentFrontEnd);
// Then recalculate loan based on `affordableMortgagePayment`. For this calculator, we assume the back-end DTI constraint is the primary driver.
// Round to two decimal places for currency
var formattedMaxLoanAmount = maxLoanAmount.toFixed(2);
// Display the result
resultValueElement.innerText = "$" + formattedMaxLoanAmount.replace(/\B(?=(\d{3})+(?!\d))/g, ",");
}