function calculateAffordability() {
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
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
// Lender typically uses a debt-to-income ratio (DTI) guideline.
// A common guideline is that total monthly debt payments (including proposed mortgage)
// should not exceed 36% of gross monthly income (front-end ratio),
// and total debt should not exceed 43% of gross monthly income (back-end ratio).
// We'll use a simplified approach here, assuming a maximum PITI payment
// based on a DTI, and then see what loan amount that supports.
var grossMonthlyIncome = annualIncome / 12;
var maxTotalMonthlyDebt = grossMonthlyIncome * 0.43; // Using back-end DTI
var maxMortgagePayment = maxTotalMonthlyDebt – monthlyDebt;
if (maxMortgagePayment 0 && numberOfPayments > 0) {
maxLoanAmount = maxMortgagePayment * (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1) / (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments));
}
// This calculation is a simplification. It doesn't account for property taxes,
// homeowner's insurance, or Private Mortgage Insurance (PMI), which would
// be part of the actual PITI payment. These can add significantly to the
// monthly cost. For a more accurate estimate, these would need to be included.
// For simplicity, we'll assume the maxMortgagePayment calculated is for P&I only
// and that taxes/insurance/PMI are also factored into the DTI limits implicitly
// by lenders or would reduce the amount available for P&I.
var maxHomePrice = maxLoanAmount + downPayment;
resultDiv.innerHTML =
"Estimated Maximum Affordable Loan Amount: $" + maxLoanAmount.toFixed(2) + "" +
"Estimated Maximum Home Price You Could Afford: $" + maxHomePrice.toFixed(2) + "" +
"Note: This is a simplified estimate. Actual affordability depends on lender approval, credit score, property taxes, homeowner's insurance, PMI (if applicable), and other lender-specific criteria.";
}
.calculator-container {
font-family: sans-serif;
border: 1px solid #ccc;
padding: 20px;
border-radius: 8px;
max-width: 600px;
margin: 20px auto;
background-color: #f9f9f9;
}
.calculator-container h2 {
text-align: center;
color: #333;
margin-bottom: 20px;
}
.calculator-inputs {
display: grid;
grid-template-columns: repeat(auto-fit, minmax(250px, 1fr));
gap: 15px;
margin-bottom: 20px;
}
.input-group {
display: flex;
flex-direction: column;
}
.input-group label {
margin-bottom: 5px;
font-weight: bold;
color: #555;
}
.input-group input[type="number"] {
padding: 10px;
border: 1px solid #ccc;
border-radius: 4px;
font-size: 16px;
}
.calculator-container button {
display: block;
width: 100%;
padding: 12px 20px;
background-color: #007bff;
color: white;
border: none;
border-radius: 4px;
font-size: 18px;
cursor: pointer;
transition: background-color 0.3s ease;
}
.calculator-container button:hover {
background-color: #0056b3;
}
#result {
margin-top: 20px;
padding: 15px;
background-color: #e9ecef;
border: 1px solid #dee2e6;
border-radius: 4px;
text-align: center;
}
#result p {
margin: 5px 0;
font-size: 1.1em;
}
#result small {
font-size: 0.8em;
color: #6c757d;
}
Understanding Home Affordability
Determining how much house you can afford is a crucial step in the home-buying process. It's not just about qualifying for a mortgage; it's about ensuring the monthly payments fit comfortably within your budget, allowing for a stable financial future. Several factors influence your home affordability, and lenders use specific metrics to assess your borrowing capacity.
Key Factors in Home Affordability:
Annual Household Income: This is the primary driver of how much you can borrow. Lenders look at your gross income (before taxes) to gauge your ability to repay a loan. Higher income generally means a higher borrowing capacity.
Existing Monthly Debt Payments: Lenders consider all your recurring monthly debt obligations, including car loans, student loans, credit card minimum payments, and any personal loans. These are subtracted from your income to determine how much is available for a mortgage payment.
Down Payment: The amount you put down upfront significantly impacts your loan amount and, consequently, your total home price affordability. A larger down payment reduces the amount you need to finance, potentially lowering your monthly payments and the overall interest paid. It can also help you avoid Private Mortgage Insurance (PMI) if you reach a certain equity threshold (typically 20%).
Interest Rate: Even a small difference in the mortgage interest rate can have a substantial impact on your monthly payment and the total interest paid over the life of the loan. Higher interest rates mean higher monthly payments for the same loan amount.
Loan Term: The duration of your mortgage (e.g., 15, 20, or 30 years) affects your monthly payments. Shorter loan terms result in higher monthly payments but less interest paid overall. Longer terms mean lower monthly payments but more interest paid over time.
Debt-to-Income Ratio (DTI): A Lender's Key Metric
Lenders commonly use the Debt-to-Income (DTI) ratio to assess your borrowing risk. It compares your total monthly debt payments to your gross monthly income. There are typically two types of DTI ratios lenders consider:
Front-End Ratio (Housing Ratio): This measures the percentage of your gross monthly income that would go towards housing expenses (Principal, Interest, Property Taxes, Homeowner's Insurance, and potentially HOA dues and PMI – collectively known as PITI). Lenders often prefer this to be below 28-31%.
Back-End Ratio (Total Debt Ratio): This measures the percentage of your gross monthly income that would go towards *all* recurring monthly debt payments, including housing expenses, car loans, student loans, credit cards, etc. Lenders commonly look for this to be below 36-43%.
Our calculator uses a simplified approach, focusing on the back-end DTI to estimate the maximum monthly mortgage payment you might afford and then calculates the potential loan amount and maximum home price based on that. It's important to remember that this calculator provides an estimate. Lenders have their own specific underwriting guidelines, and factors like credit score, employment history, and assets also play a significant role in the final mortgage approval and loan amount.
Disclaimer: This calculator is for estimation purposes only and does not constitute financial advice. Consult with a mortgage professional for personalized guidance.