1. What is Home Loan Eligibility?

The home loan eligibility calculator determines the maximum loan amount you can afford based on your monthly payment capacity, interest rate, and loan term. It helps potential homebuyers understand their purchasing power.

2. How Does the Calculator Work?

The calculator uses the present value of an annuity formula:

Where:

• \( P \) — Maximum loan amount (principal)
• \( PMT \) — Affordable monthly payment
• \( r \) — 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 (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 home price expectations, budget effectively, and avoid financial strain. It's the first step in the home buying process.

4. Using the Calculator

Tips: Enter your comfortable monthly payment, current interest rates, and desired loan term. Be realistic about what you can afford monthly, considering taxes, insurance, and other expenses.

5. Frequently Asked Questions (FAQ)

Q1: Should I include taxes and insurance in the monthly payment?
A: This calculator focuses on principal and interest only. For a complete picture, add 1-1.5% of home value annually for taxes and insurance.

Q2: How does credit score affect my eligibility?
A: Higher credit scores typically qualify for lower interest rates, increasing your eligible loan amount for the same monthly payment.

Q3: What's a good debt-to-income ratio?
A: Most lenders prefer total debt payments (including new mortgage) to be ≤43% of gross monthly income.

Q4: How much down payment should I plan for?
A: Conventional loans typically require 20% down to avoid PMI, though some programs allow as little as 3-5%.

Q5: Are there other costs I should consider?
A: Yes, factor in closing costs (2-5% of loan), moving expenses, maintenance, and potential HOA fees.