Pre Approval Calculator

Step-by-Step Guide to Using the Pre-Approval Calculator

Introduction

This Pre-Approval Calculator is a tool designed to help you estimate the potential loan amount and the purchase price of a home you can afford based on your financial information. Follow the steps below to accurately input your data and interpret the results provided by the calculator.

Step 1: Enter Your Income Information

• Annual Gross Income ($):

  Enter your total yearly income before taxes and other deductions. Make sure the value is a non-negative amount.

Step 2: Enter Your Debt Obligations

• Monthly Debt Payments ($):

  Include all your current monthly debt obligations such as car loans, credit card payments, student loans, etc. Ensure the input is a non-negative value.

Step 3: Enter Down Payment Details

• Down Payment ($):

  Input the amount you plan to contribute upfront when you purchase your home. This should also be a non-negative value.

Step 4: Specify the Interest Rate

• Interest Rate (%):

  Provide the expected annual interest rate for the home loan. This value must be between 0.01% and 30% and may include up to three decimal places for precision.

Step 5: Select Your Loan Term

• Loan Term:

  Choose the duration of the loan from the available options: 30 Years, 20 Years, or 15 Years. This selection is mandatory.

Step 6: Choose Your Credit Score Range

• Credit Score Range:

  Select the range that best represents your credit score: Excellent (740+), Good (680-739), Fair (620-679), or Poor (580-619). This will affect your maximum loan calculation.

Understanding the Results

Monthly Gross Income

Your Monthly Gross Income is calculated by dividing your Annual Gross Income by 12. This figure represents your total pretax income each month.

Maximum Monthly Payment

The Maximum Monthly Payment is determined by multiplying your Monthly Income by 0.43 and subtracting your Monthly Debt Payments. This is the maximum amount you can afford for a home loan each month.

Maximum Loan Amount

This calculation estimates the Maximum Loan Amount you may qualify for, adjusting your potential monthly payments with the chosen interest rate and loan term, factoring in your credit score.

Maximum Purchase Price

The Maximum Purchase Price is calculated by adding your down payment to the Maximum Loan Amount, indicating the highest home price you can consider.

Down Payment Percentage

This value indicates the Down Payment Percentage of your maximum purchase price, calculated by determining what percentage your down payment represents relative to this price.

Debt-to-Income Ratio

The Debt-to-Income Ratio calculates the percentage of your income that goes towards debts, including the maximum monthly payment estimated by the tool.