Your Estimated Affordability
Enter your details above to see your estimated mortgage affordability.
Understanding Mortgage Affordability
Mortgage affordability isn't just about what a bank will lend you; it's about what you can comfortably repay each month without straining your finances. Lenders typically use debt-to-income ratios (DTI) to assess risk. A common guideline is that your total monthly housing expenses (principal, interest, taxes, 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. However, these are just guidelines, and actual lending criteria can vary.
This calculator provides an estimate by considering your income, existing debts, and the potential monthly payment of a mortgage based on your inputs. It helps you understand the maximum loan amount you might qualify for and, consequently, the approximate price range of homes you can consider.
Key Factors:
- Annual Income: Your primary source of funds for repayment.
- Monthly Debt Payments: Existing financial obligations that reduce your capacity for new debt.
- Down Payment: The initial amount you pay upfront, which reduces the loan principal.
- Interest Rate: Higher rates mean higher monthly payments for the same loan amount.
- Loan Term: Longer terms result in lower monthly payments but more interest paid over time.
Remember, this is an estimation tool. For precise figures and official pre-approval, consult with a mortgage lender.
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) / 100;
var loanTermYears = parseInt(document.getElementById("loanTermYears").value);
var resultDiv = document.getElementById("result");
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTermYears)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxHousingPayment = grossMonthlyIncome * 0.28; // Using the 28% rule for housing
var maxTotalDebtPayment = grossMonthlyIncome * 0.36; // Using the 36% rule for total debt
var maxMonthlyMortgagePayment = maxTotalDebtPayment – monthlyDebt;
// Ensure maxMonthlyMortgagePayment is not negative
if (maxMonthlyMortgagePayment 0) {
// Calculate maximum loan amount using the mortgage payment formula
// M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Where:
// M = Monthly Payment
// P = Principal Loan Amount
// i = Monthly interest rate
// n = Total number of payments (loan term in months)
// Rearranging to solve for P:
// P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var i = interestRate / 12;
var n = loanTermMonths;
var M = finalMaxMonthlyMortgagePayment;
maximumLoanAmount = M * (Math.pow(1 + i, n) – 1) / (i * Math.pow(1 + i, n));
} else {
// If interest rate is 0, maximum loan is simply the total payment available over the term
maximumLoanAmount = finalMaxMonthlyMortgagePayment * loanTermMonths;
}
var estimatedHomeAffordability = maximumLoanAmount + downPayment;
resultDiv.innerHTML =
"Estimated Maximum Monthly Mortgage Payment (P&I):
$" + finalMaxMonthlyMortgagePayment.toFixed(2) + "" +
"Estimated Maximum Loan Amount:
$" + maximumLoanAmount.toFixed(2) + "" +
"Estimated Maximum Home Price You Can Afford (including down payment):
$" + estimatedHomeAffordability.toFixed(2) + "";
}