Determining how much house you can afford is one of the most crucial steps in the home-buying process. It's not just about the mortgage principal; it involves a comprehensive look at your income, debts, and the total cost of homeownership, often referred to as PITI (Principal, Interest, Taxes, and Insurance). Lenders use various metrics to assess your borrowing capacity, with the debt-to-income (DTI) ratio being a primary one. Generally, lenders prefer a front-end DTI (housing costs only) of around 28% and a back-end DTI (all debts) of around 36%, though these can vary.
This Mortgage Affordability Calculator helps you estimate your potential borrowing power by considering your annual gross income, existing monthly debt obligations, down payment, and the estimated costs associated with a mortgage, including interest, property taxes, and homeowner's insurance.
Key Factors in Affordability:
Annual Gross Income: This is the total income you earn before taxes and deductions. Lenders use this as the primary measure of your ability to repay a loan.
Existing Monthly Debt Payments: This includes all your recurring monthly payments for loans (car, student, personal) and credit cards. These debts reduce the amount of income available for a mortgage payment.
Down Payment: The upfront cash you pay towards the home's purchase price. A larger down payment reduces the loan amount needed and can improve your chances of approval and potentially secure a better interest rate.
Interest Rate: The percentage charged by the lender on the loan amount. Even small differences in interest rates can significantly impact your monthly payments and the total interest paid over the life of the loan.
Loan Term: The duration over which you'll repay the mortgage, typically 15 or 30 years. Longer terms mean lower monthly payments but more interest paid overall.
Property Taxes: Annual taxes assessed by local governments on the value of your property. These are typically paid monthly as part of your mortgage payment (escrow).
Homeowner's Insurance: Protects your home against damage from events like fire, theft, and natural disasters. This is also usually paid monthly via escrow.
By inputting these figures, the calculator provides an estimate of the maximum mortgage loan you might qualify for, and subsequently, an estimated maximum home price you could afford. Remember, this is an estimate, and your actual borrowing capacity will be determined by a mortgage lender after a full review of your financial situation.
function calculateMortgageAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var existingDebt = parseFloat(document.getElementById("existingDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value) / 100;
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var propertyTaxes = parseFloat(document.getElementById("propertyTaxes").value);
var homeInsurance = parseFloat(document.getElementById("homeInsurance").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Basic validation
if (isNaN(annualIncome) || isNaN(existingDebt) || isNaN(downPayment) || isNaN(interestRate) || isNaN(loanTerm) || isNaN(propertyTaxes) || isNaN(homeInsurance)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (annualIncome <= 0 || existingDebt < 0 || downPayment < 0 || interestRate < 0 || loanTerm <= 0 || propertyTaxes < 0 || homeInsurance < 0) {
resultDiv.innerHTML = "Please enter positive values for income, loan term, and non-negative values for others.";
return;
}
var monthlyIncome = annualIncome / 12;
var maxTotalMonthlyDebt = monthlyIncome * 0.36; // Assuming a 36% back-end DTI
var maxHousingPayment = maxTotalMonthlyDebt – existingDebt;
if (maxHousingPayment <= 0) {
resultDiv.innerHTML = "Based on your existing debt, you may not qualify for a mortgage at this time.";
return;
}
var monthlyPropertyTax = propertyTaxes / 12;
var monthlyHomeInsurance = homeInsurance / 12;
var maxPrincipalAndInterest = maxHousingPayment – monthlyPropertyTax – monthlyHomeInsurance;
if (maxPrincipalAndInterest 0) {
// Mortgage payment formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Rearranging to solve for P: P = M [ (1 + i)^n – 1] / [ i(1 + i)^n ]
var numerator = Math.pow((1 + interestRate / 12), loanTermMonths) – 1;
var denominator = (interestRate / 12) * Math.pow((1 + interestRate / 12), loanTermMonths);
mortgageAmount = maxPrincipalAndInterest * (numerator / denominator);
} else {
// If interest rate is 0, the loan amount is simply monthly payment times number of months
mortgageAmount = maxPrincipalAndInterest * loanTermMonths;
}
var estimatedMaxHomePrice = mortgageAmount + downPayment;
resultDiv.innerHTML = "