Buying a home is one of the biggest financial decisions you'll make. A crucial step in this process is understanding how much house you can realistically afford. This isn't just about the sticker price of the home; it's about the total monthly cost, including your mortgage payment, property taxes, homeowner's insurance, and potentially private mortgage insurance (PMI) and HOA fees.
Lenders use various metrics to determine how much they are willing to lend you. Two common guidelines are the 28/36 rule and lender-specific debt-to-income ratios.
The 28/36 Rule: This widely used guideline suggests that your total housing costs (principal, interest, taxes, and insurance – PITI) should not exceed 28% of your gross monthly income, and your total debt payments (including PITI) should not exceed 36% of your gross monthly income.
Lender's Perspective: Lenders will assess your income, existing debts, credit score, and down payment to determine your borrowing capacity. They want to ensure you can comfortably manage the monthly payments without overextending yourself.
This mortgage affordability calculator helps you estimate the maximum loan amount you might qualify for based on your income, existing debts, down payment, and current interest rates. It uses a common method to estimate your maximum monthly PITI payment and then calculates the corresponding loan amount. Remember, this is an estimate, and your actual loan approval will depend on a lender's full underwriting process.
Key Factors to Consider:
Income: Your stable, verifiable income is the primary factor.
Debts: Existing loans (car, student, personal), credit card payments, and other recurring financial obligations significantly impact your borrowing capacity.
Down Payment: A larger down payment reduces the loan amount needed and can improve your chances of approval and loan terms.
Interest Rates: Even small changes in interest rates can dramatically affect your monthly payments and the total interest paid over the life of the loan.
Credit Score: A good credit score generally leads to better interest rates and loan options.
Property Taxes & Insurance: These are essential components of your monthly housing cost and vary by location and property type.
Homeowners Association (HOA) Fees: If applicable, these monthly fees must also be factored into your housing budget.
Use this calculator as a starting point for your home-buying journey. It's always recommended to speak with a mortgage lender to get pre-approved and understand your specific borrowing power.
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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 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
// Assumptions for affordability calculation (common lender guidelines)
// 1. Maximum housing expense ratio (PITI / Gross Monthly Income)
var maxHousingRatio = 0.28;
// 2. Maximum total debt ratio (Total Monthly Debt Payments / Gross Monthly Income)
var maxTotalDebtRatio = 0.36;
// 3. Estimated monthly property taxes and homeowner's insurance (as a percentage of estimated home price)
// This is a rough estimate and can vary wildly. We'll estimate it based on the potential loan amount later.
// For now, let's assume it's a part of the total monthly payment calculation.
// A common approach is to estimate ~1.2% of the home value annually for taxes and insurance combined.
var grossMonthlyIncome = annualIncome / 12;
var maxTotalMonthlyDebtAllowed = grossMonthlyIncome * maxTotalDebtRatio;
var maxPitiAllowed = grossMonthlyIncome * maxHousingRatio;
// The amount available for PITI after existing debts
var availableForPiti = maxTotalMonthlyDebtAllowed – monthlyDebt;
// We need to ensure that the availableForPiti is not negative
if (availableForPiti < 0) {
availableForPiti = 0; // Cannot afford anything if existing debt is too high
}
// The actual PITI we can afford is the minimum of what's allowed by housing ratio and what's left after other debts
var affordablePiti = Math.min(maxPitiAllowed, availableForPiti);
// If affordablePiti is zero or less, the person cannot afford any mortgage payment.
if (affordablePiti <= 0) {
resultDiv.innerHTML = "Based on your income and existing debts, you may not qualify for additional mortgage payments. Consult a financial advisor.";
return;
}
// Now, we need to estimate the maximum loan amount based on the affordable PITI.
// This requires an iterative process or a financial formula for loan payment.
// The mortgage payment formula is: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where:
// M = Monthly Payment (our affordablePiti)
// P = Principal Loan Amount (what we want to find)
// i = monthly interest rate (annualRate / 12 / 100)
// n = total number of payments (loanTermYears * 12)
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
// Calculate the monthly payment factor
var paymentFactor = (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) /
(Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
// Calculate the maximum loan amount based *only* on PITI
// This formula assumes affordablePiti is *only* for Principal and Interest (PI).
// However, PITI includes Taxes and Insurance. This is where it gets tricky without estimating T&I.
// A common simplification is to assume T&I are a percentage of the loan amount or home value.
// Let's refine: The `affordablePiti` is the maximum total monthly housing expense (Principal, Interest, Taxes, Insurance).
// So, our P&I payment must be `affordablePiti – estimatedMonthlyTaxesAndInsurance`.
// Estimating Taxes and Insurance is crucial. A rough estimate is 1.2% of home value annually, so 0.1% monthly.
// Since we don't know the home value yet, we can assume the maximum loan amount will be roughly the home value minus down payment.
// Let's assume a loan amount (P) and calculate the total PITI, then see if it fits.
// We'll use an iterative approach or a simplified assumption.
// **Simplified Approach:**
// Assume `affordablePiti` covers PI, Taxes, and Insurance.
// We need to estimate the monthly taxes and insurance to subtract from `affordablePiti` to get the maximum P&I payment.
// Let's use a common estimate for property taxes and insurance as a percentage of the estimated loan value.
// A rough estimate is 1.2% of the property value per year for taxes and insurance combined.
// So, for a loan P, the estimated property value might be P + downPayment.
// Estimated monthly T&I = ((P + downPayment) * 0.012) / 12
// Let's use an alternative approach: estimate the maximum home price affordability.
// Max Home Price = Loan Amount + Down Payment
// Max Monthly Housing Expense (PITI) = affordablePiti
// PITI = PI + Taxes + Insurance
// Let's assume Taxes + Insurance is roughly 0.1% of the Home Price per month.
// So, PI = affordablePiti – (HomePrice * 0.001)
// PI = affordablePiti – ((LoanAmount + downPayment) * 0.001)
// PI = affordablePiti – (((MaxHomePrice – downPayment) * 0.001))
// We can try to solve for Loan Amount (P) using an approximation or iteration.
// A more direct way: Let's estimate the maximum loan amount *as if* `affordablePiti` was *just* P&I.
// This will give us an upper bound. Then we can refine.
var maxLoanAmountIfPitiIsJustPI = affordablePiti / paymentFactor;
// This `maxLoanAmountIfPitiIsJustPI` is an overestimate because it doesn't account for taxes and insurance.
// Let's assume that Taxes and Insurance will consume a portion of the `affordablePiti`.
// A common rule of thumb is that T&I might be 10-20% of the total PITI payment.
// Let's try a conservative estimate where P&I takes up 75% of `affordablePiti`.
var estimatedMaxPiPayment = affordablePiti * 0.75; // Assuming 25% for T&I
if (estimatedMaxPiPayment <= 0) {
resultDiv.innerHTML = "Based on your income and existing debts, your estimated maximum monthly housing payment is very low, making it difficult to afford a loan.";
return;
}
// Calculate the maximum loan principal based on the estimated maximum P&I payment.
var maxLoanAmount = estimatedMaxPiPayment / paymentFactor;
// Ensure the calculated loan amount is not negative.
if (maxLoanAmount < 0) {
maxLoanAmount = 0;
}
// Calculate the estimated total home price
var estimatedHomePrice = maxLoanAmount + downPayment;
// Display results
var formattedLoanAmount = maxLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedHomePrice = estimatedHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMonthlyPiti = affordablePiti.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = `
Your Estimated Affordability:
Maximum Estimated Loan Amount: ${formattedLoanAmount}
Estimated Maximum Home Price (Loan + Down Payment): ${formattedHomePrice}
Estimated Maximum Total Monthly Housing Payment (PITI): ${formattedMonthlyPiti}
This is an estimate. Actual loan approval depends on lender's underwriting, credit score, and other factors. Assumes P&I payment is ~75% of total PITI.
`;
}