Mortgage Affordability Calculator
Understanding Mortgage Affordability
Determining how much house you can afford is a crucial step in the home-buying process. This mortgage affordability calculator helps you estimate your potential borrowing power based on your income, existing debts, down payment, and the current interest rate environment.
Lenders typically use two main ratios to assess your ability to repay a mortgage: the Debt-to-Income (DTI) ratio and the Front-End DTI (often called the housing ratio).
- Debt-to-Income (DTI) Ratio: This ratio compares your total monthly debt payments (including the potential mortgage payment, property taxes, homeowners insurance, and any HOA fees) to your gross monthly income. Lenders generally prefer a DTI of 43% or lower, though some may go higher depending on your credit score and other factors.
- Front-End DTI (Housing Ratio): This ratio specifically looks at the proposed housing costs (principal, interest, property taxes, insurance, and HOA fees) as a percentage of your gross monthly income. A common guideline is to keep this ratio around 28% or lower.
This calculator takes into account your annual income and existing monthly debt to estimate the maximum monthly mortgage payment you might qualify for. It then works backward using the provided interest rate and loan term to suggest an estimated maximum loan amount. Your down payment is then added to this loan amount to provide an estimated maximum home price you could potentially afford.
Important Considerations:
- This is an estimate: Actual loan approval depends on many factors, including your credit score, employment history, lender-specific criteria, and the property's appraisal value.
- Included Costs: Remember that homeownership involves more than just the mortgage principal and interest. Factor in property taxes, homeowners insurance, potential private mortgage insurance (PMI) if your down payment is less than 20%, and potential homeowner association (HOA) fees. These costs will increase your total monthly housing expense.
- Don't stretch too thin: While this calculator shows what you might qualify for, it's wise to consider what monthly payment you are truly comfortable with to maintain a good quality of life.
Use this calculator as a starting point to understand your potential purchasing power and to guide your conversations with mortgage lenders and real estate agents.
.calculator-container {
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#result {
margin-top: 20px;
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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 loanTerm = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// — Input Validation —
if (isNaN(annualIncome) || annualIncome <= 0) {
resultDiv.innerHTML = "
Error: Please enter a valid annual household income.";
return;
}
if (isNaN(monthlyDebt) || monthlyDebt < 0) {
resultDiv.innerHTML = "
Error: Please enter a valid total monthly debt payment.";
return;
}
if (isNaN(downPayment) || downPayment < 0) {
resultDiv.innerHTML = "
Error: Please enter a valid down payment amount.";
return;
}
if (isNaN(interestRate) || interestRate 20) { // Assuming max 20% is a reasonable upper bound
resultDiv.innerHTML = "
Error: Please enter a valid interest rate (e.g., between 1 and 20).";
return;
}
if (isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "
Error: Please enter a valid loan term in years.";
return;
}
// — Calculations —
var grossMonthlyIncome = annualIncome / 12;
// Using a common guideline for the maximum housing payment (front-end DTI)
// e.g., 28% of gross monthly income. This can vary by lender.
var maxHousingPayment = grossMonthlyIncome * 0.28;
// Using a common guideline for the maximum total debt payment (back-end DTI)
// e.g., 36% of gross monthly income. Lenders often use 43% or higher.
// We'll use the lower of these two to be conservative, but in reality,
// lenders will look at both and your specific situation.
var maxTotalDebtPayment = grossMonthlyIncome * 0.36;
var allowedMonthlyDebtPayment = Math.min(maxHousingPayment, maxTotalDebtPayment – monthlyDebt);
// Ensure allowed monthly payment for the mortgage is not negative
var affordableMonthlyMortgagePayment = Math.max(0, allowedMonthlyDebtPayment);
// Calculate maximum loan amount based on affordable monthly mortgage payment
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
var maxLoanAmount = 0;
if (monthlyInterestRate > 0) {
// Formula for Present Value of an Annuity (Loan Amount)
// PV = PMT * [1 – (1 + r)^-n] / r
maxLoanAmount = affordableMonthlyMortgagePayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
// If interest rate is 0, loan amount is simply payment times number of periods
maxLoanAmount = affordableMonthlyMortgagePayment * numberOfPayments;
}
// Estimate total affordable home price
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
// — Display Results —
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 });
var formattedEstimatedMaxHomePrice = estimatedMaxHomePrice.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 });
var formattedAffordableMonthlyMortgagePayment = affordableMonthlyMortgagePayment.toLocaleString('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 });
resultDiv.innerHTML =
"Estimated Maximum Monthly Mortgage Payment (Principal & Interest Only):
" + formattedAffordableMonthlyMortgagePayment + "" +
"Estimated Maximum Loan Amount:
" + formattedMaxLoanAmount + "" +
"Estimated Maximum Home Price (Loan Amount + Down Payment):
" + formattedEstimatedMaxHomePrice + "" +
"
Note: This is an estimate. Actual affordability depends on lender criteria, credit score, taxes, insurance, and other factors.";
}