Estimate your potential borrowing power based on your financial information.
Excellent (800+)
Very Good (740-799)
Good (670-739)
Fair (580-669)
Poor (500-579)
Enter your details to see your estimated prequalification.
Understanding Mortgage Loan Prequalification
Mortgage prequalification is an initial assessment of how much a lender might be willing to lend you based on your reported financial information. It's a crucial first step in the home-buying process, providing a realistic budget and strengthening your offer when you find a home you love. Unlike pre-approval, prequalification is typically based on self-reported information and a quick review of your credit, rather than a full underwriting process.
How the Calculator Works (The Math Behind Prequalification)
This calculator uses common financial ratios and guidelines to provide an estimated prequalification amount. Lenders generally use two key ratios to assess your borrowing capacity:
Debt-to-Income Ratio (DTI): This is a measure of how much of your gross monthly income goes towards paying your debts.
Front-End DTI (Housing Ratio): This ratio looks at just your potential housing costs (principal, interest, taxes, insurance – PITI) as a percentage of your gross monthly income. A common guideline is that PITI should not exceed 28% of your gross monthly income.
Back-End DTI (Total Debt Ratio): This ratio includes all your monthly debt obligations (including PITI) as a percentage of your gross monthly income. Lenders typically prefer this ratio to be below 36%, though it can go up to 43% or even higher for certain loan programs and borrowers with strong credit.
Estimated Monthly PITI Calculation: This is a simplified estimation. For a true PITI, you'd need to add property taxes, homeowner's insurance, and potentially Private Mortgage Insurance (PMI) or HOA fees.
Loan-to-Value Ratio (LTV): This compares the loan amount to the value of the home. A larger down payment results in a lower LTV, which is generally more favorable.
Formula: (Loan Amount) / (Home Value)
Credit Score Impact: While not directly in a simple ratio, your credit score significantly influences the interest rate you'll qualify for, which in turn affects your monthly payment and thus your DTI and overall affordability. Higher credit scores generally lead to lower interest rates.
Simplified Calculation Logic Used:
Our calculator provides a rough estimate by focusing on the Back-End DTI, as it's a comprehensive measure. It assumes a maximum Back-End DTI based on your credit score and then works backward to estimate the maximum loan amount you could potentially handle, considering your existing debts and down payment.
Assumptions in this Calculator:
It primarily uses the Back-End DTI ratio.
It estimates a maximum allowable monthly housing payment (PITI).
It does NOT factor in property taxes, homeowner's insurance, or PMI directly, as these vary significantly by location and loan type. A real lender would include these.
The down payment reduces the amount you need to borrow.
Key Factors Influencing Your Prequalification Amount:
Income: Higher income generally means you can afford a larger loan.
Existing Debts: Lower monthly debt payments free up more income for a mortgage.
Down Payment: A larger down payment reduces the loan amount and can improve your LTV.
Credit Score: A good credit score helps secure a better interest rate, making your mortgage more affordable.
Budgeting: To get a ballpark figure of your home-buying budget early in the process.
Financial Planning: To understand how improving your credit or reducing debt could impact your ability to purchase a home.
Initial Lender Conversations: To prepare for discussions with mortgage lenders.
Disclaimer: This calculator provides an *estimate* for prequalification purposes only. It is not a loan offer and does not guarantee loan approval. Actual loan amounts and terms will be determined by a mortgage lender after a full application, credit check, income verification, appraisal, and underwriting process.
function calculatePrequalification() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var creditScore = parseInt(document.getElementById("creditScore").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var resultTextElement = document.getElementById("resultText");
var resultDiv = document.getElementById("result");
// Clear previous error messages and styles
resultTextElement.innerText = "";
resultDiv.style.backgroundColor = "#28a745"; // Default to success green
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyDebt) || monthlyDebt < 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(interestRate) || interestRate = 800) {
maxTotalDTI = 0.45; // Up to 45% for excellent credit
} else if (creditScore >= 740) {
maxTotalDTI = 0.43; // Up to 43%
} else if (creditScore >= 670) {
maxTotalDTI = 0.41; // Up to 41%
} else if (creditScore >= 580) {
maxTotalDTI = 0.38; // Up to 38%
} else { // Poor credit
maxTotalDTI = 0.36; // Up to 36%, may face more challenges
}
// Estimate maximum monthly housing payment (PITI)
// This is a simplified assumption. Lenders use complex calculations.
// We assume a portion of the max DTI is available for housing.
// This is a heuristic; a real calculation is more involved.
// A common guideline for front-end DTI is 28%.
// Let's ensure the total doesn't exceed maxTotalDTI.
// We'll aim for a housing payment that, when added to existing debt, fits within maxTotalDTI.
var maxAllowableTotalObligations = monthlyIncome * maxTotalDTI;
var maxMonthlyHousingPayment = maxAllowableTotalObligations – monthlyDebt;
if (maxMonthlyHousingPayment 0) {
var factor = Math.pow(1 + monthlyInterestRate, numberOfMonths);
estimatedLoanAmount = maxMonthlyHousingPayment * (factor – 1) / (monthlyInterestRate * factor);
} else { // Handle 0% interest rate edge case (unlikely for mortgages but for completeness)
estimatedLoanAmount = maxMonthlyHousingPayment * numberOfMonths;
}
// Subtract the down payment to get the estimated maximum home price
var estimatedMaxHomePrice = estimatedLoanAmount + downPayment;
// Display the result
var formattedMaxHomePrice = estimatedMaxHomePrice.toLocaleString(undefined, {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 0,
maximumFractionDigits: 0
});
resultTextElement.innerText = "Estimated Prequalification Amount:";
var amountSpan = document.createElement('span');
amountSpan.innerText = formattedMaxHomePrice;
resultTextElement.appendChild(amountSpan);
// Add a small note about the down payment
var downPaymentNote = document.createElement('span');
downPaymentNote.style.fontSize = '0.8rem';
downPaymentNote.style.fontWeight = 'normal';
downPaymentNote.style.marginTop = '5px';
downPaymentNote.style.display = 'block';
downPaymentNote.innerText = `(Includes estimated loan amount of ${estimatedLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 })} + your down payment of ${downPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD', minimumFractionDigits: 0, maximumFractionDigits: 0 })})`;
resultTextElement.appendChild(downPaymentNote);
// Adjust background color for very low or zero estimations
if (estimatedMaxHomePrice < 50000) { // Arbitrary threshold for caution
resultDiv.style.backgroundColor = "#ffc107"; // Yellow for caution
} else if (estimatedMaxHomePrice <= 0) {
resultDiv.style.backgroundColor = "#dc3545"; // Red for error/unqualified
}
}