1. What is the Home Loan Eligibility Formula?

The home loan eligibility formula calculates the maximum principal amount (P) you can borrow based on your affordable monthly payment (PMT), interest rate (r), and loan term (n). It helps determine how much house you can afford based on your budget.

2. How Does the Calculator Work?

The calculator uses the loan eligibility formula:

Where:

• \( P \) — Principal 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 an annuity (the loan) based on regular payments, interest rate, and time period.

3. Importance of Loan Eligibility Calculation

Details: Calculating loan eligibility helps home buyers understand their purchasing power, set realistic budgets, and avoid overextending financially.

4. Using the Calculator

Tips: Enter your comfortable monthly payment, current interest rate, and desired loan term. The calculator will show the maximum loan amount you can qualify for based on these parameters.

5. Frequently Asked Questions (FAQ)

Q1: How accurate is this calculation?
A: This provides a good estimate, but actual loan approval depends on credit score, debt-to-income ratio, and lender policies.

Q2: Should I include taxes and insurance in the monthly payment?
A: Yes, for accurate results your PMT should include principal, interest, taxes, and insurance (PITI).

Q3: How does interest rate affect loan amount?
A: Higher rates reduce the loan amount you qualify for at the same payment level. Even small rate changes can significantly impact eligibility.

Q4: 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.

Q5: Can I increase my loan eligibility?
A: Options include improving credit score, increasing down payment, extending loan term, or finding a co-signer.