1. What is Home Loan Eligibility?

Home loan eligibility determines how much you can borrow based on your income, debts, and the loan terms. Lenders use your debt-to-income (DTI) ratio to assess your ability to repay the loan.

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)
• \( n \) — Number of months

Explanation: The formula calculates the maximum loan amount you could afford based on your monthly payment capacity, interest rate, and loan term.

3. Importance of DTI Ratio

Details: Your debt-to-income ratio compares your monthly debt payments to your gross monthly income. Most lenders prefer a DTI below 43%, with 36% or lower considered ideal.

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 for mortgage approval?
A: Most lenders prefer ≤43%, with ≤36% being ideal. Some programs may allow up to 50% with strong compensating factors.

Q2: Does this include property taxes and insurance?
A: This calculator focuses on principal and interest. For complete budgeting, add ~1-2% of home value annually for taxes/insurance.

Q3: How does credit score affect eligibility?
A: Higher scores typically qualify for better rates, which may increase your eligible loan amount at the same payment.

Q4: Should I use gross or net income?
A: Lenders use gross income. However, budgeting with net income gives a more realistic view of affordability.

Q5: How often should I check my eligibility?
A: Reassess whenever your income changes significantly, interest rates move substantially, or every 6 months while house hunting.