Determining how much house you can afford is a crucial step in the home-buying process. It's not just about what a lender might approve you for, but what fits comfortably within your budget and financial goals. The Mortgage Affordability Calculator is designed to give you a clearer picture by considering various factors that influence your borrowing power and the total cost of homeownership.
Key Factors in Mortgage Affordability:
Annual Household Income: This is the primary driver of your ability to repay a loan. Lenders typically use debt-to-income (DTI) ratios, and your income is the denominator.
Monthly Debt Payments: Beyond your potential mortgage, lenders will look at your existing obligations like credit card payments, student loans, and car loans. These reduce the amount of monthly income available for a mortgage payment.
Down Payment: A larger down payment reduces the loan amount needed, which in turn lowers your monthly payments and potentially the interest paid over the life of the loan. It can also help you avoid Private Mortgage Insurance (PMI).
Interest Rate: Even small differences in interest rates can significantly impact your monthly payment and the total cost of your loan. Rates are influenced by market conditions, your credit score, and the loan term.
Loan Term: A shorter loan term (e.g., 15 years) means higher monthly payments but less interest paid overall. A longer term (e.g., 30 years) results in lower monthly payments but more interest paid over time.
Property Taxes: These are ongoing costs of homeownership that must be factored into your total monthly housing expense. They vary significantly by location.
Homeowners Insurance: This protects your property and is a mandatory expense for mortgage holders.
Private Mortgage Insurance (PMI): If your down payment is less than 20% of the home's purchase price, lenders usually require PMI to protect themselves. This adds to your monthly housing cost.
How the Calculator Works:
This calculator estimates your maximum affordable mortgage based on common lending guidelines and your provided inputs. It typically considers the following:
Maximum Monthly Housing Payment: Lenders often recommend that your total housing costs (principal, interest, property taxes, insurance, and PMI – often referred to as PITI) should not exceed a certain percentage of your gross monthly income (often around 28-31%).
Debt-to-Income (DTI) Ratio: Lenders also look at your total monthly debt obligations (including the estimated mortgage payment) as a percentage of your gross monthly income. A common guideline is that total DTI should not exceed 36-43%.
The calculator will calculate a potential maximum monthly payment you can afford, considering these guidelines and your existing debts. It then works backward to estimate the maximum loan amount you could take out, factoring in your down payment, interest rate, loan term, and associated homeownership costs.
Important Note:
This calculator provides an estimate for informational purposes only. It does not constitute a loan approval or guarantee. Lender underwriting criteria can vary, and your actual affordability may differ. It's always recommended to speak with a mortgage professional for personalized advice and to get pre-approved.
function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebtPayments = parseFloat(document.getElementById("monthlyDebtPayments").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var propertyTaxesAnnual = parseFloat(document.getElementById("propertyTaxesAnnual").value);
var homeownersInsuranceAnnual = parseFloat(document.getElementById("homeownersInsuranceAnnual").value);
var pmiPercentage = parseFloat(document.getElementById("pmiPercentage").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebtPayments) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(propertyTaxesAnnual) || isNaN(homeownersInsuranceAnnual) || isNaN(pmiPercentage)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
// Lender guidelines (common approximations)
var maxHousingRatio = 0.31; // Max PITI as % of gross monthly income
var maxDtiRatio = 0.43; // Max total debt payments as % of gross monthly income
var grossMonthlyIncome = annualIncome / 12;
// Calculate maximum allowable total monthly debt (including PITI)
var maxMonthlyTotalDebt = grossMonthlyIncome * maxDtiRatio;
// Calculate remaining budget for PITI after existing debts
var maxMonthlyPITI = maxMonthlyTotalDebt – monthlyDebtPayments;
// Ensure maxMonthlyPITI is not negative
if (maxMonthlyPITI 0, it will be recalculated later.
// For an initial estimate, we might assume it's a small portion or try to iteratively solve.
// A simpler approach for this calculator is to calculate the loan amount assuming NO PMI,
// then calculate the PMI and see if it fits. If it doesn't, the affordability might be lower.
// For simplicity here, let's assume PMI is 0 for the initial max loan calculation,
// and then add it if needed to check affordability.
// Estimate maximum affordable loan amount
// Formula for monthly mortgage payment (P&I): M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where:
// M = monthly payment (P&I only)
// P = principal loan amount
// i = monthly interest rate (annual rate / 12)
// n = total number of payments (loan term in years * 12)
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// Let's work backwards from the maximum PITI.
// Max PITI = Max P&I + Monthly Taxes + Monthly Insurance + Monthly PMI
// We need to solve for P (loan amount) iteratively or make an assumption about PMI.
// Let's assume PMI is 0 for the first pass to find the maximum loan.
var maxLoanAmount = 0;
var estimatedMaxMonthlyPI = maxMonthlyPITI – monthlyPropertyTaxes – monthlyHomeownersInsurance;
if (estimatedMaxMonthlyPI 0) {
maxLoanAmount = estimatedMaxMonthlyPI * (factor – 1) / (monthlyInterestRate * factor);
} else { // Handle 0% interest rate case (though unlikely for mortgages)
maxLoanAmount = estimatedMaxMonthlyPI * numberOfPayments;
}
// Now consider PMI if down payment is less than 20% of the estimated purchase price
var estimatedPurchasePrice = maxLoanAmount + downPayment;
var pmiToApply = 0;
if (downPayment / estimatedPurchasePrice 0) {
pmiToApply = (maxLoanAmount * (pmiPercentage / 100));
// Recalculate max P&I budget after accounting for PMI
estimatedMaxMonthlyPI = maxMonthlyPITI – monthlyPropertyTaxes – monthlyHomeownersInsurance – pmiToApply;
if (estimatedMaxMonthlyPI 0) {
maxLoanAmount = estimatedMaxMonthlyPI * (factor – 1) / (monthlyInterestRate * factor);
} else {
maxLoanAmount = estimatedMaxMonthlyPI * numberOfPayments;
}
estimatedPurchasePrice = maxLoanAmount + downPayment; // Recalculate purchase price
}
var totalMonthlyPayment = estimatedMaxMonthlyPI + monthlyPropertyTaxes + monthlyHomeownersInsurance + pmiToApply;
var totalLoanAmount = maxLoanAmount; // This is the maximum mortgage we can afford
var totalInterestPaid = (totalLoanAmount * monthlyInterestRate * numberOfPayments) – totalLoanAmount; // Approximation for P&I portion
resultDiv.innerHTML = `
Your Estimated Affordability:
Maximum Affordable Purchase Price: $${estimatedPurchasePrice.toFixed(2)}
Maximum Mortgage Loan Amount: $${totalLoanAmount.toFixed(2)}
Estimated Maximum Monthly PITI Payment: $${totalMonthlyPayment.toFixed(2)}
Principal & Interest (P&I): $${estimatedMaxMonthlyPI.toFixed(2)}