Prequalify - Mortgage Approval Calculators Help
You're ready to buy a home--or are you? Using free mortgage calculator tools can help you determine your readiness to shop for a mortgage. Prequalify for a mortgage loan, and you can be in a stronger position for buying the home you want. Sellers will know that you're a serious buyer, and prequalifying can help avoid last minute delays during the mortgage approval process.
Affordability and Approval: Prequalify Before You Buy
When approving you for mortgage financing, lenders typically use ratios of housing expenses to gross income and all obligations to gross income. You can use a prequalify calculator to estimate your ratios. If your ratios are too high, use the information supplied by this calculator to set goals for reducing debt or looking for a less costly home.
Using an affordability calculator can help you determine how much house you can buy with different mortgage interest rates and loan terms. When using this calculator, it's important to note that mortgage payments often include additional amounts for payment of property taxes, hazard insurance, and mortgage insurance, so a principal and interest (P&I) calculation is likely not accurate for determining your total mortgage payment amount.
How Much Can I Afford to Spend for a Home?
When shopping for a new home, it's easy to get caught up in the emotional aspects of finding your "perfect" home, a home that may come with too high a price. A great advantage to prequalifying for a mortgage is that you'll know how much you can afford to borrow, and consequently, the price range of affordable homes. You can estimate affordability by entering a mortgage amount, estimated interest rate, and repayment term (number of years) in the amortization calculator. The calculator will provide the amount of the P&I payment, and also the total cost of a mortgage over the term you select.
This can be an eye-opener, and may encourage you to seek a mortgage with a shorter term. For example, a mortgage of $250,000 repaid over 30 years at a fixed rate of 5%, will require a total of $483,139 in P&I payments. If you shorten the term from 30 years to 15 years, you'll repay $355,857. In this case, you could potentially save $127,282 in interest by choosing a 15 year loan over a 30 year loan.
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