A mortgage loan approval calculator is a helpful tool that can provide an estimate of how much you could borrow and the monthly payment associated with it. It takes into account factors like income, down payment amount, debt load and more to determine your eligibility for a mortgage loan. Furthermore, the calculator shows what your payments might look like if certain costs are removed from the equation.
What Makes a Mortgage Affordable?
A loan’s interest rate is an important factor in determining how much you can afford to spend on a home. Lenders usually offer lower rates to people with good credit scores, while higher interest rates are reserved for borrowers with less-than-stellar scores.
This calculator is based on user inputs and loan assumptions, so it does not guarantee you a loan. Results may differ due to changes in your debt situation, financial situation and loan program. Please contact us for more details regarding the actual rates, loan programs and payments that apply to your individual situation.
Debt-to-income ratios, or DTIs, are one of the key elements lenders consider when approving your application for a mortgage. This number represents a percentage of all monthly housing expenses such as your mortgage payment, taxes, insurance and HOA fees divided by pre-tax income. Ideally, your DTI should fall below 36% so that you can comfortably afford your mortgage while still having money left over for other expenses.
The mortgage loan approval calculator also allows you to enter the amount of down payment needed and whether private mortgage insurance (PMI) is necessary. PMI protects lenders in case you default on your loan, but it can add thousands of dollars onto the cost of obtaining financing.
Down payments vary by lender, but as a general guideline it’s wise to put at least 20 percent down on your new home. This is an effective way to secure a lower interest rate and save on monthly payments.
In addition to your down payment, other factors that can influence how much you can afford include the loan’s interest rate and length. A longer mortgage term may result in lower monthly payments but takes longer to pay off, leading to higher interest costs overall.
Based on your creditworthiness and other criteria, you may be eligible for a mortgage with either low or no down payment. If so, the loan usually carries a lower interest rate and shorter payment period than conventional or FHA loans.
If you don’t have a large down payment or would prefer not to pay for PMI, an adjustable-rate mortgage (ARM) might be your best bet. This could be particularly advantageous if you plan on staying in your home long term or are trying to purchase a property in an expensive market.
