1. What is Home Loan Eligibility?

The home loan eligibility calculator determines the maximum loan amount you can afford based on your comfortable monthly payment, interest rate, and loan term. This helps in budgeting and home shopping within your financial means.

2. How Does the Calculator Work?

The calculator uses the present value of an annuity formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( PMT \) — Affordable monthly payment (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Total number of payments (months)

Explanation: The formula calculates the present value of a series of future payments (your monthly mortgage payments) discounted at the loan's interest rate.

3. Importance of Loan Eligibility Calculation

Details: Knowing your maximum loan amount helps set realistic expectations when house hunting and ensures you don't overextend your finances. Lenders will also evaluate your debt-to-income ratio when approving loans.

4. Using the Calculator

Tips:

• Enter your comfortable monthly payment (typically 25-30% of your monthly income)
• Use current market interest rates
• Common loan terms are 15 or 30 years
• All values must be positive numbers

5. Frequently Asked Questions (FAQ)

Q1: What percentage of my income should go to housing?
A: Most lenders recommend keeping housing costs below 28% of gross monthly income, with total debt payments below 36%.

Q2: How does credit score affect loan eligibility?
A: Higher credit scores typically qualify for lower interest rates, which increases your purchasing power for the same monthly payment.

Q3: Should I include property taxes and insurance?
A: This calculator focuses on principal and interest. For a complete picture, add 1-2% of home value annually for taxes and insurance.

Q4: What's better - 15-year or 30-year mortgage?
A: 15-year loans have higher payments but lower interest rates and total cost. 30-year loans have lower payments but higher total interest.

Q5: How much down payment is needed?
A: Conventional loans typically require 20% down to avoid PMI, but FHA loans may require as little as 3.5%.