Mortgage Affordability Calculator
Estimate how much house you can afford based on your income and debts.
Affordability Results
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function calculateMortgageAffordability() { var annualIncome = parseFloat(document.getElementById("ma_annualIncome").value); var monthlyDebt = parseFloat(document.getElementById("ma_monthlyDebt").value); var downPayment = parseFloat(document.getElementById("ma_downPayment").value); var interestRate = parseFloat(document.getElementById("ma_interestRate").value); var loanTermYears = parseInt(document.getElementById("ma_loanTerm").value); var propertyTaxRate = parseFloat(document.getElementById("ma_taxRate").value); var annualInsurance = parseFloat(document.getElementById("ma_insurance").value); var errorDiv = document.getElementById("ma_error"); var resultDiv = document.getElementById("ma_result"); if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(propertyTaxRate) || isNaN(annualInsurance) || annualIncome <= 0 || interestRate <= 0) { errorDiv.style.display = "block"; resultDiv.style.display = "none"; return; } errorDiv.style.display = "none"; var grossMonthlyIncome = annualIncome / 12; // Back-end DTI limit assumed at 43% for conventional financing var maxTotalMonthlyObligation = grossMonthlyIncome * 0.43; var maxAvailableForHousing = maxTotalMonthlyObligation – monthlyDebt; if (maxAvailableForHousing <= 0) { resultDiv.style.display = "block"; document.getElementById("ma_maxPriceDisplay").innerText = "$0"; document.getElementById("ma_monthlyPaymentDisplay").innerText = "$0"; return; } // Inputs for loan calculation var monthlyInterestRate = (interestRate / 100) / 12; var totalPayments = loanTermYears * 12; var monthlyInsurance = annualInsurance / 12; var monthlyTaxRateDecimal = (propertyTaxRate / 100) / 12; // Iterative approach to find Max Price because Taxes depend on Price // Start assuming the payment is 80% P&I as a guess var estimatedPI = maxAvailableForHousing * 0.80; var maxLoanAmount = 0; var maxPrice = 0; var calculatedMonthlyTax = 0; var totalEstimatedPayment = 0; // Perform 5 iterations to converge on a reasonably accurate price for(var i = 0; i < 5; i++) { // Calculate Max Loan based on available P&I component // Formula: Loan = (Payment * ((1+r)^n – 1)) / (r * (1+r)^n) var discountFactor = (Math.pow(1 + monthlyInterestRate, totalPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, totalPayments)); maxLoanAmount = estimatedPI * discountFactor; maxPrice = maxLoanAmount + downPayment; // Recalculate actual obligations based on this new price calculatedMonthlyTax = maxPrice * monthlyTaxRateDecimal; var actualPI = (maxLoanAmount * monthlyInterestRate * Math.pow(1 + monthlyInterestRate, totalPayments)) / (Math.pow(1 + monthlyInterestRate, totalPayments) – 1); totalEstimatedPayment = actualPI + calculatedMonthlyTax + monthlyInsurance; // Adjust the available P&I for the next iteration based on the difference var difference = maxAvailableForHousing – totalEstimatedPayment; estimatedPI = estimatedPI + (difference * 0.9); // Adjust by 90% of difference to avoid overshooting } // Final calculation with converged numbers var finalMonthlyPI = (maxLoanAmount * monthlyInterestRate * Math.pow(1 + monthlyInterestRate, totalPayments)) / (Math.pow(1 + monthlyInterestRate, totalPayments) – 1); var finalTotalMonthlyPayment = finalMonthlyPI + calculatedMonthlyTax + monthlyInsurance; if (maxPrice < 0) maxPrice = 0; if (finalTotalMonthlyPayment < 0) finalTotalMonthlyPayment = 0; // Formatting output currency var formatter = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0, }); document.getElementById("ma_maxPriceDisplay").innerText = formatter.format(maxPrice); document.getElementById("ma_monthlyPaymentDisplay").innerText = formatter.format(finalTotalMonthlyPayment); resultDiv.style.display = "block"; }Understanding Mortgage Affordability
Determining "how much house can I afford" is the crucial first step in the homebuying process. It prevents you from falling in love with property outside your financial reach and helps you set realistic expectations for your budget. Your affordability isn't just about the sticker price of the house; it's about whether your monthly income can comfortably support the total monthly housing payment alongside your existing financial obligations.
The Crucial Role of Debt-to-Income (DTI) Ratio
Lenders primarily use a metric called the Debt-to-Income (DTI) ratio to decide how much they are willing to lend you. This ratio compares your total gross monthly income before taxes to your total monthly debt payments.
While different loan programs have different requirements, a common standard used by conventional lenders is the 43% rule (often called the "back-end ratio"). This means that your total monthly debts—including your future mortgage principal, interest, taxes, and insurance (PITI), plus existing debts like car payments, student loans, and credit card minimums—should generally not exceed 43% of your gross monthly income.
For example: If your gross annual income is $96,000, your gross monthly income is $8,000. Based on a 43% DTI limit, your total allowable monthly debt payments would be $3,440 ($8,000 x 0.43). If you already have $600 in car and student loan payments, the maximum amount left for your new housing payment would be $2,840.
Other Factors Impacting Affordability
- The Down Payment: The more money you put down upfront, the less you need to borrow. A larger down payment increases the price of the home you can afford while keeping monthly payments lower. It can also help you avoid Private Mortgage Insurance (PMI) if you put down 20% or more.
- Interest Rates: Even a small change in interest rates can significantly affect your buying power. A 1% increase in the interest rate can reduce your purchasing power by tens of thousands of dollars because more of your monthly payment goes toward interest rather than principal.
- Property Taxes and Insurance: These are often overlooked costs that get bundled into your monthly mortgage payment. A home in an area with high property taxes will lower the maximum loan amount you qualify for compared to an identically priced home in a low-tax area.
How This Calculator Works
This Mortgage Affordability Calculator uses the inputs you provide regarding your income and current debts to establish a maximum monthly housing budget based on standard lender DTI guidelines. It then works backward, factoring in your down payment, the current interest rate, loan term, and estimated taxes and insurance, to calculate the maximum total home price allowable under those constraints.
Remember that this tool provides an estimate. For a definitive answer, you must get pre-approved by a qualified mortgage lender who will verify your financial documents and credit score.