Determining how much house you can afford is a crucial step in the home-buying process. This mortgage affordability calculator helps you estimate the maximum loan amount you might qualify for based on your income, existing debts, and market interest rates.
Lenders typically use a set of ratios to assess your borrowing capacity. Two common ratios are the front-end ratio (housing ratio) and the back-end ratio (debt-to-income ratio or DTI).
Front-end Ratio: This measures the percentage of your gross monthly income that would go towards housing expenses (principal, interest, taxes, and insurance – PITI). Lenders often prefer this to be no more than 28%.
Back-end Ratio: This measures the percentage of your gross monthly income that would go towards all monthly debt obligations, including your potential mortgage payment. Lenders often prefer this to be no more than 36% to 43%, though it can vary.
This calculator focuses on estimating your maximum *loan amount* based on the back-end ratio, considering your income and existing debts. The down payment you have available will then determine the maximum *home price* you can afford (Loan Amount + Down Payment).
How the Calculation Works:
1. Gross Monthly Income: Your annual income is divided by 12.
2. Maximum Allowable Monthly Debt: We use a common back-end DTI limit (e.g., 43%) and multiply it by your gross monthly income.
3. Maximum Mortgage Payment: The maximum allowable monthly debt is reduced by your existing monthly debt payments. This gives you the maximum you can afford for your principal, interest, taxes, and insurance (PITI).
4. Estimated Loan Amount: Using a mortgage payment formula, we work backward from the maximum PITI to estimate the maximum loan principal you could borrow, given the interest rate and loan term.
5. Estimated Home Price: This is calculated by adding your estimated maximum loan amount to your down payment.
Disclaimer: This calculator provides an estimate for informational purposes only. It does not constitute a loan approval or a guarantee of financing. Actual loan amounts and terms will depend on lender underwriting, credit history, property appraisal, and other factors. Always consult with a mortgage professional for personalized advice.
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 loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebtPayments) || monthlyDebtPayments < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate <= 0 ||
isNaN(loanTermYears) || loanTermYears <= 0) {
resultDiv.innerHTML = "Error: Please enter valid positive numbers for all fields.";
return;
}
// Constants (can be adjusted based on lender standards or user input)
var maxDTI = 0.43; // Maximum Debt-to-Income ratio (e.g., 43%)
// Calculations
var grossMonthlyIncome = annualIncome / 12;
var maxAllowableMonthlyDebt = grossMonthlyIncome * maxDTI;
var maxMonthlyMortgagePayment = maxAllowableMonthlyDebt – monthlyDebtPayments;
// Ensure the calculated maximum mortgage payment is not negative
if (maxMonthlyMortgagePayment 0) {
maxLoanAmount = maxMonthlyMortgagePayment * (Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths));
} else { // Handle 0% interest rate case (though rare for mortgages)
maxLoanAmount = maxMonthlyMortgagePayment * loanTermMonths;
}
// Ensure loan amount is not negative due to extreme input values, although unlikely with previous checks
maxLoanAmount = Math.max(0, maxLoanAmount);
var estimatedMaxHomePrice = maxLoanAmount + downPayment;
// Display Results
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedEstimatedMaxHomePrice = estimatedMaxHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxMonthlyMortgagePayment = maxMonthlyMortgagePayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedGrossMonthlyIncome = grossMonthlyIncome.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxAllowableMonthlyDebt = maxAllowableMonthlyDebt.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = `