Determining how much house you can afford is a crucial step in the home-buying process. Lenders and financial advisors often use several metrics to estimate your borrowing capacity. This calculator helps you estimate your maximum affordable mortgage based on key financial factors.
Key Factors Explained:
Annual Household Income: This is the total gross income (before taxes) of all borrowers combined. Lenders look at this as your primary ability to repay a loan.
Total Monthly Debt Payments: This includes all your existing monthly financial obligations, such as car loans, student loans, personal loans, and credit card minimum payments. These are factored in to assess your overall debt-to-income ratio.
Down Payment Amount: The upfront cash you contribute towards the purchase of the home. A larger down payment reduces the loan amount needed and can improve your chances of approval and potentially secure a better interest rate.
Estimated Annual Interest Rate: This is the annual percentage rate you can expect to pay on your mortgage. Mortgage rates fluctuate based on market conditions, your credit score, and the loan type.
Loan Term (Years): The duration over which you agree to repay the mortgage. Common terms are 15 or 30 years. A shorter term usually means higher monthly payments but less interest paid over time.
How the Calculator Works:
This calculator uses a common guideline that a household's total housing costs (including mortgage principal and interest, property taxes, homeowners insurance, and potentially HOA fees) should not exceed 28% of their gross monthly income. Additionally, your total debt-to-income ratio (including housing costs) should ideally not surpass 36% of your gross monthly income.
The calculator first estimates the maximum monthly mortgage payment you can afford by considering these percentages and subtracting your existing monthly debt. Then, it works backward to estimate the maximum loan amount you could qualify for with the given interest rate and loan term. Finally, it adds your down payment to estimate your maximum affordable home price.
Important Disclaimer:
This calculator provides an estimation for informational purposes only and should not be considered a loan commitment or pre-approval. Actual mortgage amounts and terms will be determined by lenders after a full review of your credit history, income verification, property appraisal, and other underwriting criteria. It's always recommended to speak with a mortgage professional for personalized advice.
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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");
// Clear previous results and error messages
resultDiv.innerHTML = "";
// Input validation
if (isNaN(annualIncome) || annualIncome < 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate = 100 ||
isNaN(loanTerm) || loanTerm <= 0) {
resultDiv.innerHTML = "Error: Please enter valid positive numbers for all fields.";
return;
}
// — Calculations —
// Constants for affordability ratios (typical lender guidelines)
var maxHousingRatio = 0.28; // Max % of gross income for housing (PITI)
var maxTotalDebtRatio = 0.36; // Max % of gross income for total debt (PITI + other debts)
var monthlyIncome = annualIncome / 12;
// Calculate maximum allowable monthly housing payment (P&I portion)
// This is derived from the total debt ratio, considering existing debts
var maxTotalMonthlyPaymentAllowed = monthlyIncome * maxTotalDebtRatio;
var maxMonthlyPrincipalInterest = maxTotalMonthlyPaymentAllowed – monthlyDebt;
// Ensure the calculated max P&I is not negative
if (maxMonthlyPrincipalInterest 0.000001) { // Use a small epsilon for comparison
maxLoanAmount = maxMonthlyPrincipalInterest * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate;
} else {
// If interest rate is effectively zero, the loan amount is simply the max payment times the number of payments
maxLoanAmount = maxMonthlyPrincipalInterest * numberOfPayments;
}
// Calculate estimated maximum affordable home price
var maxAffordablePrice = maxLoanAmount + downPayment;
// Format results for display
var formattedMaxLoanAmount = "$" + maxLoanAmount.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
var formattedMaxAffordablePrice = "$" + maxAffordablePrice.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
var formattedMonthlyIncome = "$" + monthlyIncome.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
var formattedMaxMonthlyPrincipalInterest = "$" + maxMonthlyPrincipalInterest.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
// Display results
resultDiv.innerHTML = `
Based on your inputs:
Estimated Max Affordable Home Price: ${formattedMaxAffordablePrice}
(This includes your down payment of ${"$" + downPayment.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,')})Estimated Max Loan Amount: ${formattedMaxLoanAmount}
Estimated Max Monthly Principal & Interest (P&I): ${formattedMaxMonthlyPrincipalInterest}
(Assumes housing costs do not exceed ${Math.round(maxHousingRatio * 100)}% of your gross monthly income of ${formattedMonthlyIncome})(Assumes total debt does not exceed ${Math.round(maxTotalDebtRatio * 100)}% of your gross monthly income)
`;
}