1. What is Home Loan Eligibility?

Home loan eligibility refers to the maximum loan amount you can qualify for based on your affordable monthly payment, interest rate, and loan term. This calculator helps you determine how much house you can afford based on your budget.

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 in budgeting for a home purchase, understanding your borrowing capacity, and negotiating with lenders.

4. Using the Calculator

Tips: Enter your comfortable monthly payment, current interest rate, and desired loan term. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in the monthly payment?
A: This should include principal, interest, property taxes, and insurance (PITI). HOA fees should be considered separately.

Q2: How does interest rate affect eligibility?
A: Higher rates reduce your maximum loan amount as more of your payment goes toward interest rather than principal.

Q3: What's a typical loan term?
A: Most home loans are 15 or 30 years, but other terms may be available. Longer terms increase eligibility but cost more in interest.

Q4: Does this include down payment?
A: No, this calculates the loan amount only. Your total purchase price would be loan amount plus down payment.

Q5: How accurate is this calculator?
A: This provides a good estimate, but actual lender approval may consider credit score, debt-to-income ratio, and other factors.