Estimated Maximum Mortgage Loan Amount You Can Afford:
Understanding Your Mortgage Affordability
Determining how much mortgage you can afford is a crucial step before embarking on the home-buying journey. It helps you set realistic expectations and avoid overextending your finances. This calculator provides an estimate based on common financial guidelines, but it's important to remember that lenders will perform their own detailed analysis.
How the Calculation Works:
This calculator uses two primary metrics to estimate your affordable mortgage loan amount:
Debt-to-Income Ratio (DTI): Lenders typically have limits on how much of your gross monthly income can go towards debt payments. A common guideline is the front-end DTI (housing expenses only) and the back-end DTI (all debt obligations). This calculator uses a simplified approach by considering your existing debt to ensure your total housing payment (mortgage principal, interest, taxes, insurance) doesn't exceed a certain percentage of your income. We generally assume a maximum housing payment of around 28% of gross monthly income, and a total debt payment (including housing) of around 36% of gross monthly income.
Mortgage Payment Calculation: Once an estimated maximum monthly mortgage payment is determined (after accounting for existing debt), the calculator works backward to find the maximum loan principal you can afford. This involves the standard mortgage payment formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment
P = Principal Loan Amount (what we are solving for)
i = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Payments (Loan Term in Years * 12)
Rearranging this formula to solve for P (Principal Loan Amount) is necessary for our calculator.
Factors Affecting Affordability (Beyond this Calculator):
While this calculator offers a good starting point, several other factors influence a lender's decision and your actual affordability:
Credit Score: A higher credit score generally leads to lower interest rates and better loan terms.
Loan Type: Different loan programs (e.g., FHA, VA, Conventional) have varying requirements and may affect the amount you can borrow.
Property Taxes and Homeowners Insurance: These are included in your monthly mortgage payment (escrow) and can vary significantly by location and property type.
Private Mortgage Insurance (PMI): If your down payment is less than 20%, you'll likely need to pay PMI, which increases your monthly payment.
Closing Costs: These are fees paid at the closing of a real estate transaction and can add several thousand dollars to your upfront costs.
Your Lender's Specific Guidelines: Each lender has its own risk tolerance and underwriting criteria.
Disclaimer: This calculator provides an ESTIMATE only. It is not a loan offer or pre-approval. Consult with a qualified mortgage lender for accurate figures tailored to your specific financial situation.
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 = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
var resultValueSpan = document.getElementById("result-value");
// Input validation
if (isNaN(monthlyIncome) || monthlyIncome <= 0 ||
isNaN(existingDebt) || existingDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
alert("Please enter valid positive numbers for all fields.");
resultDiv.style.display = "none";
return;
}
// Guideline percentages
var maxHousingPaymentRatio = 0.28; // Maximum % of gross monthly income for housing (PITI)
var maxTotalDebtRatio = 0.36; // Maximum % of gross monthly income for all debts (including housing)
// Calculate maximum affordable housing payment
var maxAffordableHousingPayment = monthlyIncome * maxHousingPaymentRatio;
// Calculate maximum total debt payment allowed
var maxTotalDebtAllowed = monthlyIncome * maxTotalDebtRatio;
// Determine the actual limit for the housing payment based on existing debt
// The housing payment cannot exceed the difference between total debt allowed and existing debt.
var maxMonthlyHousingPayment = Math.min(maxAffordableHousingPayment, maxTotalDebtAllowed – existingDebt);
// Ensure the max monthly housing payment is not negative
if (maxMonthlyHousingPayment 0 && numberOfPayments > 0) {
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1;
var denominator = monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments);
if (denominator > 0) {
maxLoanAmount = maxMonthlyHousingPayment * (numerator / denominator);
}
} else if (monthlyInterestRate === 0 && numberOfPayments > 0) {
// Handle 0% interest rate case (simple division)
maxLoanAmount = maxMonthlyHousingPayment * numberOfPayments;
}
// Format the result
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString('en-US', { style: 'currency', currency: 'USD', maximumFractionDigits: 0 });
resultValueSpan.textContent = formattedMaxLoanAmount;
resultDiv.style.display = "block";
}