Purchase Information - This is where you enter the home selling price and loan information.

Home Price - Enter the selling price of the home, don’t use commas "," or periods "."

Down % - The percentage of the home price you will be putting as a downpayment.

Loan Amount - Take the home price and subtract the downpayment. This equals the loan amount.

Interest Rate - Enter the rate of interest you want to calculate with. Too find some interest rates to use, go to our rates page. Example for 7.25%, enter 7.25

Term Years - Enter the number of years for the loan. Normally use 30.

House Payment Information - This area is for determining the total house payment including property taxes, homeowners insurance and mortgage insurance (if required). Adjust the numbers in this section carefully or not at all.

Principal and Interest - The portion of the payment that pays off the loan balance (Principal) and interest on the balance, over time.

Prop. Tax Rate - Annual property taxes as a percentage of the Home Price divided by twelve to get a monthly amount for the total payment (Default takes $250,000 X 1.2 / 1200. This works out to $3,000 annual property taxes for a $250,000 Home Price or $250 per month). Even if you are not planning to have property taxes as part of your payment, the lenders use it as part of the debt ratios.

Insurance Rate - Annual homeowners insurance as a percentage of the Home Price divided by twelve to get a monthly amount for the total payment (Default takes $250,000 X .17 / 1200. This works out to $425 annual homeowners insurance for a $250,000 Home Price or $36 per month). Even if you are not planning to have homeowners insurance as part of your payment, the lenders use it as part of the debt ratios.

PMI Rate - Private Mortgage Insurance. Do Not Change this setting, it is set by the percentage down. This is insurance required by the lenders when you put less than 20% downpayment. It pays the lender if you default on the loan. The larger percentage you put down, the less the monthly cost. There are loans you can do with less than 20% down without PMI, even with 100% financing. For more information about PMI, give us a call.

Total Payment PITI - This is the total house payment including property taxes, homeowners insurance and mortgage insurance (if required) that is used to determine your debt ratios for qualifying.

Pre-Qualifying Calculation - This is where you enter your financial information and the debt ratios are determined for the new purchase. To see maximum loan amount you qualify for, keep raising the price until the "Maybe not..." message appears. Then lower the price back down until the "It looks like this will work" message appears.

Annual Income - Enter your total combined annual income, before taxes. Be sure to include any W-2 or self-employment income, net rental income after payments, interest & dividends, child support you receive (if any).

Total Monthly Debt - Enter your total combined minimum monthly debt payments. Be sure to include car payments, minimum required credit card payments, installment debts, student loans, spousal or child support you pay. Do not include car payments that will be paid off within 10 months with normal payments. Do not include food, utilities, insurances or other normal household expenses.

Debt Ratios - These numbers are important to the lender for qualifying purposes and are the main purpose for this calculator. The first number represents the Total Payment (PITI) on the house as a percentage your gross (before taxes) monthly income. Guidelines say this first number should be below 33%. It is common to get approvals to 40%. The second number represents the Total Payment (PITI) plus your Total Monthly Debt as a percentage of your gross monthly income. Guidelines say this second number should be below 38%. It is common to get approvals to 50%. Debt Ratios can be a lot higher than the guidelines allow with compensating factors such as a large downpayment (20% or more), high Credit Scores (700+), large cash reserves in the bank and other factors. There are loans that do not even consider debt ratios. In these loans, you can have debt ratios over 1000% and still be approved. Call us for help.

Debt Ratio examples:

Can you buy this house? - This decision is made on this calculator on the basis if you meet 40/45 Debt Ratios according to the data you entered. This is not a guarantee of a loan approval or denial. Many other factors go into this decision. You need an experienced Loan Officer to help make the final determination.