Mortgage Affordability Calculator by Payment
Prequalifying for a mortgage is a helpful step if you’re looking to buy a home. Usually, a mortgage broker or lender may prequalify you by assessing your credit rating and income information.
Using PropertyNest’s mortgage calculator can give you a good idea of how much you might be prequalified for and what your monthly mortgage payments, closing costs, and monthly taxes might look like.
How Do I Use PropertyNest’s Mortgage Calculator?
Finding out how much you might be able to afford is as simple as entering your income and credit score range. Customize your breakdown to a particular property by entering property tax and HOA information if you have it.
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Understanding What a Prequalification is
A mortgage prequalification is something you work through with a lender or bank. Going through the process will help the lender determine if you have the necessary criteria in terms of income, credit, and debt. It can be an eye-opening step to not only deem if you are ready to buy, but how much you can actually spend.
How is Prequalification Determined?
Looking at income is just one of the components that is used to determine your buying power. Your monthly debt gets used as true measure against your monthly gross income when it comes to financial institutions. Most lenders feel comfortable with applicants who have less than a 36% debt-to-income ratio or a DTI. PropertyNest’s Prequalification Mortgage calculator also factors in the DTI to approximate your buying power.
Preapproval Versus Prequalification
Preapproval and prequalification sounds like nearly the same thing. They are actually similar, but preapproval is a much more crucial step when you want to be one step closer to purchasing your home. With a preapproval letter from a bank, you can make a serious offer on a property, showing that you are a buyer with credentials and have passed the first serious step in obtaining a mortgage. The preapproval process is much more official than prequalification and involves pulling your credit and submitting pay stubs and other income documentation. The prequalification and preapproval process can take just one day depending on how quickly you can get your information and documentation the lender. However, a prequalification is more informal, whereas your preapproval letter is good for about three months, after which point you may have to submit paperwork again.
How You Can Improve Your Prequalification
You can get prequalified for a bigger mortgage by improving on your credit score if that’s the factor that is holding you back. Some of them can be simple fixes such as paying down balances and any open collections. If your credit is suffering from repeated late payments or bankruptcy, you may have to wait for some time for improvement. If income is holding you back, you can try ways to increase your income or improve your debt-to-income ratio by paying down your debts.
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