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Mortgage Affordability Calculator

Estimate your maximum home buying budget based on income and debts.

(Car loans, student loans, credit card minimums, etc.)

30 Years 20 Years 15 Years

function calculateMortgageAffordability() { var incomeInput = document.getElementById('annualIncome').value; var debtsInput = document.getElementById('monthlyDebts').value; var downPaymentInput = document.getElementById('downPaymentAvailable').value; var rateInput = document.getElementById('mortgageInterestRate').value; var termInput = document.getElementById('mortgageLoanTerm').value; var income = parseFloat(incomeInput); var debts = parseFloat(debtsInput); var downPayment = parseFloat(downPaymentInput); var rate = parseFloat(rateInput); var term = parseFloat(termInput); var resultDiv = document.getElementById('affordabilityResult'); resultDiv.style.display = 'block'; if (isNaN(income) || isNaN(debts) || isNaN(downPayment) || isNaN(rate) || isNaN(term) || income <= 0 || rate <= 0) { resultDiv.innerHTML = "Please enter valid, positive numbers for all fields. Income and interest rate must be greater than zero."; return; } // Standard conservative DTI (Debt-to-Income) ratio cap for back-end ratio (housing + all other debts) var dtiCap = 0.36; var monthlyGrossIncome = income / 12; var maxTotalAllowedMonthlyDebt = monthlyGrossIncome * dtiCap; // Calculate maximum amount available for new mortgage payment (PITI: Principal, Interest, Taxes, Insurance) var maxAvailableForPITI = maxTotalAllowedMonthlyDebt – debts; if (maxAvailableForPITI <= 0) { resultDiv.innerHTML = "Based on the provided income and existing debts, it appears you may not qualify for a standard mortgage at this time due to a high Debt-to-Income ratio."; return; } // Estimation Heuristic: // Since we don't know the home price yet, we cannot calculate exact taxes and insurance. // A common conservative estimation is that Principal & Interest (P&I) make up about 80-85% of the total monthly payment (PITI), // with the remaining 15-20% going to Taxes and Insurance. We will use an 85% factor for P&I allocation. var availableForPI = maxAvailableForPITI * 0.85; // Calculate Max Loan Amount from the available P&I payment var monthlyRate = (rate / 100) / 12; var totalPayments = term * 12; // Formula to derive Loan Amount from monthly payment: L = P * ( ((1+r)^n – 1) / (r(1+r)^n) ) var discountFactor = (Math.pow(1 + monthlyRate, totalPayments) – 1) / (monthlyRate * Math.pow(1 + monthlyRate, totalPayments)); var maxLoanAmount = availableForPI * discountFactor; // Max Home Price = Max Loan the bank will give + Cash you have var maxHomePrice = maxLoanAmount + downPayment; // Currency Formatting var formatter = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD', maximumFractionDigits: 0 }); resultDiv.innerHTML = `

Estimated Affordability

Maximum Home Price: ${formatter.format(maxHomePrice)} Estimated Max Monthly Payment (PITI): ${formatter.format(maxAvailableForPITI)} *This estimate is based on a conventional 36% Debt-to-Income (DTI) ratio standard. It assumes roughly 15% of your monthly housing budget is allocated to property taxes and homeowners insurance. Actual qualification depends on credit score, specific lender requirements, and current local tax/insurance rates. `; }

One of the first and most crucial steps in the home buying process is answering the question: "How much house can I really afford?" While it's tempting to look at homes based on the maximum loan a bank might approve, true affordability is about ensuring your monthly mortgage payments don't jeopardize your overall financial health.

Our Mortgage Affordability Calculator above uses standard lender guidelines to give you a realistic estimate of your purchasing power. It focuses not just on your income, but heavily on your existing debt obligations.

The Critical Role of the Debt-to-Income (DTI) Ratio

When lenders evaluate your mortgage application, the most important metric they look at is your Debt-to-Income (DTI) ratio. This ratio compares your total monthly gross income before taxes to your total monthly debt payments.

There are generally two types of DTI ratios considered:

• Front-End Ratio: This only counts your proposed housing costs (Principal, Interest, Taxes, and Insurance – known as PITI) against your income. Lenders typically prefer this to be under 28%.
• Back-End Ratio: This is usually the deciding factor. It includes your proposed housing costs plus all your other monthly debts, such as car payments, student loans, and minimum credit card payments. Most conventional loans require this ratio to be no higher than 36% to 43%, depending on credit score and loan type.

This calculator uses a conservative 36% back-end DTI ratio. This means it calculates a mortgage payment that, when combined with your existing debts, does not exceed 36% of your gross monthly income.

How Existing Debts Reduce Your Buying Power

It is vital to input accurate monthly debt figures. Every dollar allocated to a car payment or student loan is a dollar that cannot be used to service a mortgage. For example, a $400 monthly car payment reduces the mortgage amount you can qualify for by roughly $60,000 to $70,000 (depending on current interest rates).

If you are looking to maximize your home buying budget, paying down existing high-interest consumer debt is often the most effective first step.

The Impact of Down Payments and Interest Rates

Your affordability is also significantly impacted by the cash you have available upfront and the cost of borrowing.

• Down Payment: The more cash you can put down, the higher priced home you can buy for the same monthly payment. A larger down payment also reduces the loan-to-value (LTV) ratio, which can sometimes secure you a better interest rate or eliminate the need for Private Mortgage Insurance (PMI).
• Interest Rates: Even small changes in interest rates have drastic effects on affordability. On a $300,000 loan, the difference between a 6% rate and a 7% rate is roughly $200 per month in interest alone. When rates rise, your purchasing power decreases significantly because more of your monthly payment goes toward interest rather than principal.

Don't Forget PITI: Taxes and Insurance

A common mistake first-time buyers make is calculating affordability based only on the loan principal and interest repayment. However, your monthly mortgage check almost always includes "PITI":

• Principal (Paying back the loan balance)
• Interest (The cost of borrowing)
• Taxes (Property taxes held in escrow)
• Insurance (Homeowners insurance held in escrow)

Property taxes and insurance can easily add hundreds of dollars to your monthly payment. This calculator estimates these costs to ensure the final figure is realistic. Always check local property tax rates in the specific area you are looking to buy, as they vary wildly by location.