1. What is Home Loan Eligibility?

Home loan eligibility determines how much you can borrow based on your income, existing debts, and the lender's criteria. The maximum loan amount is calculated using your affordable monthly payment, interest rate, and loan term.

2. How Does the Calculator Work?

The calculator uses the loan formula:

Where:

• \( P \) — Maximum loan amount (USD)
• \( PMT \) — Affordable monthly payment (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in years × 12)

Explanation: The formula calculates the present value of a series of future payments (PMT) discounted at rate r over n periods.

3. Importance of DTI Ratio

Details: Debt-to-Income (DTI) ratio compares your monthly debt payments to your gross monthly income. Most lenders prefer a DTI below 43% for mortgage approval.

4. Using the Calculator

Tips: Enter your comfortable monthly payment, current interest rates, desired loan term, and annual income. The calculator will show your maximum loan amount and DTI ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Generally, 36% or lower is excellent, up to 43% is acceptable for most lenders, and above 50% is typically rejected.

Q2: Does this include property taxes and insurance?
A: This calculator only considers principal and interest. For complete affordability, include taxes, insurance, and HOA fees in your monthly payment.

Q3: How does credit score affect eligibility?
A: Higher credit scores typically qualify for lower interest rates, which increases your borrowing power.

Q4: What's the maximum loan term?
A: Most conventional loans offer terms up to 30 years, though some go to 40 years. Shorter terms mean higher payments but less interest.

Q5: How accurate is this calculator?
A: This provides an estimate. Actual loan amounts may vary based on lender policies, credit history, and other factors.