Mortgage Prequalification Calculator: Find Out How Much You Can Borrow to Buy a Home Before You Go Shopping

Prequalifying for a mortgage is an important step in the home-buying process.  Prequalification tells you how much you can borrow and the top purchase price you can pay. Follow these four steps to prequalify for a home loan

As you begin house hunting, save yourself from the grief of falling in love with a dream home, only to find you don't qualify for a loan large enough to buy it.

Follow these four steps to prequalify for a mortgage:

1. Use a Free Mortgage Prequalification Calculator. The calculator gives you good starting information before you visit lenders. Enter your gross monthly income, loan term, and an estimate of the annual percentage interest rate you're likely to get. Visit your county treasurer's Web site to get the local property tax rate, and enter that number. Input how much money you have for a down payment and closing costs. Finally, include other monthly obligations, such as payments on car loans, credit cards, child support, and alimony. The calculator then gives you the top purchase price and loan amount for which you'd qualify.

2. Gather Prequalification Paperwork. You'll need to talk with a lender to get a prequalification certificate or letter. Gather pertinent documents to make the process go smoothly, such as recent pay stubs, tax returns, bank account numbers, and other financial data

3. Prequalify with Several Lenders. Once you've made an offer on a home and you're ready to get a mortgage, you'll want to compare rates among competing lenders. You're not obligated to borrow from a lender just because that lender has prequalified you. Prequalification should be free, so you have nothing to lose by getting prequalified with more than one lender.

4. Use a Mortgage Payment Calculator. Just because a lender will let you borrow $200,000 doesn't mean you have to borrow up to that limit. That home loan amount might work out on paper, but will the monthly payments work in real life for your family? Evaluate your household budget, and don't forget to account for expenses you can't live without, whether it's ballet lessons for your kid or an annual ski season pass. Decide the monthly mortgage payment that would be comfortable for you each month, still allowing for retirement and other savings. Use a free Mortgage Payment Calculator to determine monthly payments for different loan amounts and interest rates.

Using a prequalification calculator is a good start in your home buying process. It can keep you from wasting a lot of time and help you find a home and a loan that you're comfortable with.





Posted By :
Barbara Marquand is a freelance writer who writes frequently on mortgage and personal finance topics.

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