Use this calculator to estimate how much you can afford to borrow for a mortgage. This calculation takes into account your income, debts, and desired down payment.
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margin: 20px auto;
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.calculator-result {
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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 interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var propertyTaxRate = parseFloat(document.getElementById("propertyTaxRate").value);
var homeInsuranceRate = parseFloat(document.getElementById("homeInsuranceRate").value);
var resultDiv = document.getElementById("result");
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTermYears) || isNaN(propertyTaxRate) || isNaN(homeInsuranceRate)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (annualIncome <= 0 || monthlyDebt < 0 || downPayment < 0 || interestRate <= 0 || loanTermYears <= 0 || propertyTaxRate < 0 || homeInsuranceRate < 0) {
resultDiv.innerHTML = "Please enter positive values for income, rates, and term. Debt and down payment can be zero.";
return;
}
// Rule of thumb: Debt-to-Income (DTI) ratio limits. Lenders often look at both front-end and back-end DTI.
// A common guideline is that total housing costs (PITI: Principal, Interest, Taxes, Insurance) should not exceed 28% of gross monthly income,
// and total debt (including PITI) should not exceed 36% of gross monthly income.
var maxHousingRatio = 0.28;
var maxTotalDebtRatio = 0.36;
var grossMonthlyIncome = annualIncome / 12;
var maxMonthlyHousingPayment = grossMonthlyIncome * maxHousingRatio;
var maxTotalMonthlyDebt = grossMonthlyIncome * maxTotalDebtRatio;
var maxAllowableMortgagePayment = maxTotalMonthlyDebt – monthlyDebt;
// We need to find the maximum loan amount that fits within either constraint (housing or total debt)
// and also allows for taxes and insurance.
// We will iterate to find the maximum loan amount that satisfies the affordability constraints.
// This is an iterative approach because property taxes and insurance depend on the home value (loan amount + down payment).
var maxLoanAmount = 0;
var step = 1000; // Increment in steps to find the approximate max loan amount
var maxPossibleLoan = grossMonthlyIncome * 12 * (maxTotalDebtRatio / 0.36); // A very rough upper bound to limit iteration
for (var loanAmountGuess = 0; loanAmountGuess 0 && monthlyInterestRate > 0) {
monthlyPrincipalAndInterest = loanAmountGuess * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths)) / (Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1);
} else if (loanAmountGuess > 0) { // Interest rate is 0, simple division
monthlyPrincipalAndInterest = loanAmountGuess / loanTermMonths;
}
var totalMonthlyHousingCost = monthlyPrincipalAndInterest + monthlyTaxes + monthlyInsurance;
var totalMonthlyObligations = totalMonthlyHousingCost + monthlyDebt;
// Check against the two primary affordability metrics
var withinHousingRatio = totalMonthlyHousingCost <= maxMonthlyHousingPayment;
var withinTotalDebtRatio = totalMonthlyObligations 0 && (monthlyPrincipalAndInterest > maxAllowableMortgagePayment + monthlyTaxes + monthlyInsurance || totalMonthlyObligations > maxTotalMonthlyDebt)) {
break; // Stop if we exceed total debt or housing portion is too high implicitly
}
if (loanAmountGuess > 0 && totalMonthlyHousingCost > maxMonthlyHousingPayment) {
// If we exceed the housing ratio constraint, stop.
break;
}
maxLoanAmount = loanAmountGuess;
}
// Ensure maxLoanAmount is not negative or extremely small due to calculation quirks
if (maxLoanAmount < 0) maxLoanAmount = 0;
var affordableHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML = "Estimated Maximum Loan Amount: $" + maxLoanAmount.toLocaleString(undefined, { maximumFractionDigits: 0 }) + "" +
"Estimated Affordable Home Price: $" + affordableHomePrice.toLocaleString(undefined, { maximumFractionDigits: 0 }) + "";
}
Understanding Mortgage Affordability
Deciding how much house you can afford is a critical step in the home-buying process. It's not just about what a lender will offer you, but what you're comfortable paying each month without straining your finances. This mortgage affordability calculator helps you estimate your borrowing potential by considering several key financial factors.
Key Factors in Affordability:
Annual Gross Income: This is your total income before taxes and other deductions. Lenders use this to gauge your ability to repay a loan.
Total Monthly Debt Payments: This includes payments for car loans, student loans, credit cards, and any other recurring debts you have, excluding your potential new mortgage payment. A lower debt-to-income ratio generally improves your borrowing power.
Down Payment Amount: The upfront cash you pay towards the home purchase. A larger down payment reduces the loan amount needed, potentially making the home more affordable and lowering your monthly payments.
Estimated Annual Interest Rate: Mortgage interest rates significantly impact your monthly payment. Higher rates mean higher payments for the same loan amount. This calculator uses an estimated rate to project costs.
Loan Term (Years): The length of time you have to repay the mortgage. Common terms are 15 or 30 years. Longer terms result in lower monthly payments but higher total interest paid over the life of the loan.
Property Tax Rate: Local property taxes are an essential part of your total housing cost, often included in your monthly mortgage payment (as part of PITI – Principal, Interest, Taxes, Insurance). This rate is usually a percentage of the home's assessed value.
Homeowners Insurance Rate: This covers potential damage to your home and property. Like property taxes, it's often paid monthly through your mortgage escrow. The rate is typically a percentage of the home's value.
How the Calculator Works:
This calculator uses common lending guidelines and financial formulas to estimate your affordable mortgage amount. A widely used rule of thumb is the Debt-to-Income (DTI) ratio. Lenders often consider two main DTI thresholds:
Front-End DTI (Housing Ratio): Your total monthly housing costs (Principal, Interest, Property Taxes, Homeowners Insurance – PITI) should ideally not exceed 28% of your gross monthly income.
Back-End DTI (Total Debt Ratio): Your total monthly debt obligations (including PITI) should ideally not exceed 36% of your gross monthly income.
The calculator identifies the maximum loan amount that keeps your projected PITI within the 28% housing ratio and ensures your total monthly debt (including PITI) stays within the 36% total debt ratio, after accounting for your existing debts and down payment. It then calculates the corresponding affordable home price.
Example Scenario:
Let's say you have:
Annual Gross Income: $100,000
Total Monthly Debt Payments (car loan, student loan): $600
Down Payment: $30,000
Estimated Annual Interest Rate: 5.5%
Loan Term: 30 Years
Estimated Annual Property Tax Rate: 1.1%
Estimated Annual Homeowners Insurance Rate: 0.4%
Based on these figures, the calculator would estimate your maximum affordable loan amount and the resulting affordable home price, helping you set realistic expectations for your home search.
Disclaimer: This calculator provides an estimate for informational purposes only. It does not constitute a loan approval or guarantee. Your actual borrowing capacity will be determined by a mortgage lender after a thorough review of your financial profile, credit history, and the specific property you intend to purchase. Market conditions and lender-specific criteria can also affect loan terms and affordability.