Mortgage Qualification Calculator
Use our Mortgage Qualification Calculator to determine what size mortgage you qualify for based on your monthly gross income and debt expenses. Many factors affect what size mortgage you can afford including your monthly income and debt, credit profile, interest rate, loan type and purpose and mortgage length. Please note that this calculator uses your monthly gross income, which is your income before any deductions such as taxes or social security to determine what size mortgage you can afford. Additionally, the calculator uses your monthly debt expenses such as credit card, auto and student loan payments and not your loan balance. For example if you pay $250 per month on a credit card with a $5,000 balance, you input $250 in your total monthly debt payments field below.
Our Mortgage Qualification Calculator also provides estimated property tax and hazard insurance expense which is added to your mortgage payment to calculate your total monthly housing expense. It is important to understand how costs other than your mortgage payment impact the loan amount you qualify for. Knowing your monthly housing expense can also help you manage your financial budget and better understand the total cost of home ownership.
We recommend that you evaluate multiple scenarios to determine what size mortgage you qualify for based on different factors including interest rate and loan length. Even a small change in these inputs can have a significant impact on mortgage qualification. For example, the lower your mortgage rate and longer the length of your loan, the lower your monthly payment and higher the loan amount you can afford. Use this calculator to understand the mortgage payment and total monthly housing expense that you are comfortable with based on your personal and financial profile and goals. We also offer a version of this calculator that does not require personal information.
Monthly Housing Payments
- Loan Type
Key Mortgage Qualification Requirements
Your credit score is one of the most important factors that determines your ability to qualify for a mortgage. Lenders typically require borrowers to have a minimum credit score of 620 although certain mortgage programs permit lower scores. Additionally, the higher your credit score, the lower your mortgage rate and the lower your credit score, the higher your mortgage rate. You can use our mortgage qualification calculator to understand how your mortgage rate impacts what size loan you can afford. Borrowers should check their credit score six-to-twelve months before applying for a mortgage to identify and address any issue in their credit profile.
Your debt-to-income ratio represents the maximum amount of your monthly gross income that you can spend on total monthly housing expense (mortgage payment plus property tax, homeowners insurance and other applicable housing expenses) plus monthly debt payments such as auto, student and credit card loans. Lenders typically apply a maximum borrower debt-to-income ratio of 43% to 50% to determine what size mortgage you qualify for, although some lenders and mortgage programs apply higher or lower ratios. Borrowers seeking to maximize their mortgage amount may want to pay down their monthly debt before applying for a mortgage to improve their debt-to-income ratio. Our mortgage qualification calculator applies a debt-to-income ratio to determine what size mortgage you can afford.
Lenders usually require that borrowers have two years of continuous employment history before you apply for a mortgage, unless you recently graduated from college. Additionally, if you have changed jobs recently and your new job has an initial probation period the lender may wait until the end of the probation period before approving you for a mortgage. Finally, self-employed borrowers are usually required to provide additional documentation and some lenders may not offer mortgages to self-employed borrowers. Please note that lenders have discretion over how they apply the borrowers employment history guideline.
Lenders also require that borrower provide two years of residence history when you apply for a mortgage. Your residence history includes properties that you have lived in that you have both owned and rented. If you have not owned or rented a home prior to applying for a mortgage (for example if you were living with a relative) it can be challenging to qualify for a mortgage. Borrowers should be sure to understand a lenders residence history requirement before applying for a mortgage.
Lenders usually require borrowers to make a down payment of 10% to 20% of the property purchase price to qualify for a mortgage, although there are several mortgage programs that enable you to buy a home with a low or no down payment. Saving money for a down payment is one of the biggest challenges to buying a home even for borrowers with good credit scores and steady jobs. In addition to making a down payment borrowers are also required to pay mortgage closing costs and potentially hold savings in reserve when the mortgage closes so borrowers need to make sure they have enough money to meet the lender's down payment and other qualification requirements.
The loan program you select also impacts how much mortgage you qualify for. For example, the initial monthly payments for an adjustable rate mortgage (ARM) or interest only loan are usually lower than for a fixed rate mortgage. The lower payment means that you can afford a higher mortgage amount, although ARMs and interest only loans involve more risk than a fixed rate loan because your payment can potentially increase significantly. Interest rates also vary by loan program and you can use our mortgage qualification calculator to see what size loan you qualify for with different programs.
Additional Housing Expenses
There is more to mortgage qualification than just the payment you can afford based on your income and debt expenses. Lenders also consider cost items such as property taxes and hazard insurance to assess what size mortgage you can afford. Additionally, if you are buying a condominium or co-op that requires you to pay monthly dues then these fees are considered an additional monthly debt expense by the lender, which reduces the mortgage amount you qualify for. Borrowers should be sure to factor in all potential housing expenses -- including mortgage insurance -- to determine the loan amount they can afford.
More FREEandCLEAR Mortgage Resources
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Mortgage Affordability: https://www.consumerfinance.gov/about-us/blog/mortgage-moves-how-much-can-you-afford/