Home loan calculator

To calculate how much you can afford to borrow on a house, lenders look at a few different factors of your overall financial health. According to NerdWallet those factors include:

• Household income
• Monthly debts (e.g., student loans, car loans, etc.)
• Down payment on the home

Before we get into the specifics, this calculator provides two estimates, one for aggressive underwriting guidelines and one that uses conservative guidelines. When the economy is strong, mortgage lenders will tend to lower their loan qualification standards. When the economy is weaker, these standards will typically rise.

The home loan calculator uses your household income and monthly debt obligations to calculate your debt-to-income (DTI) ratio. For example, if your monthly income was $3,000 and your debt obligations totaled $500 monthly, your DTI ratio would be 16%.

In general, your housing costs should amount to no more than 28% of your monthly pre-tax income. Your total debts should not amount to more than 36% of your pre-tax income. The calculator uses this rule to calculate what monthly mortgage payment you can likely afford to pay.

From there, the calculator uses your loan information to estimate the loan amount based on the term of the loan, the interest rate, your down payment, plus any other obligations like property tax and homeowners insurance.

A home loan calculator helps give you an understanding of what is affordable for your current financial situation. That said, a mortgage is not the only financial obligation that comes with purchasing a new home. Here are other factors to consider:

• Closing costs (vary based on the home, location and other factors)
• Utilities at the new home (electricity, cable, internet and water)
• Moving-related expenses (movers, trucks, item storage movers insurance)
• You may discover that your new home needs repairs/updates

Ultimately, this calculator is meant to help you get an estimate for what kind of loan you may be approved for. The specifics of a monthly payment or the amount of the loan can change depending on your specific situation. For a better understanding of you may be approved for, try getting prequalified from your chosen lender(s).

By going through actual lenders, you’ll be able to get an estimate based on the financial information you provide, as well as an independent credit check. Getting prequalified can also help you decide between a fixed or variable rate mortgage.