1. What is the Loan Amount Calculator?

This calculator determines how much you can borrow for a home loan based on your desired monthly payment, interest rate, and loan term. It helps potential homebuyers understand their borrowing capacity before house hunting.

2. How Does the Calculator Work?

The calculator uses the loan amount formula:

Where:

• Monthly payment — Your affordable monthly payment amount
• r — Monthly interest rate (annual rate ÷ 12)
• n — Total number of payments (loan term in years × 12)

Explanation: The formula calculates the present value of an annuity (the loan amount) based on regular payments (monthly mortgage payments).

3. Importance of Loan Calculation

Details: Knowing your borrowing capacity helps set realistic expectations when shopping for homes and ensures you don't overextend financially. It's a crucial first step in the home buying process.

4. Using the Calculator

Tips: Enter your maximum comfortable monthly payment, current interest rates, and desired loan term. Be sure to account for property taxes and insurance in your monthly payment if they aren't included.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and insurance?
A: No, this calculates principal and interest only. Your actual monthly payment will be higher when including taxes and insurance (PITI).

Q2: How does credit score affect this?
A: Your credit score affects the interest rate you qualify for. Better credit scores get lower rates, which increases borrowing power.

Q3: What's a good debt-to-income ratio?
A: Most lenders prefer your total debt payments (including new mortgage) to be below 36-43% of your gross income.

Q4: Should I borrow the maximum amount?
A: Not necessarily. Consider your other financial goals and unexpected expenses before maxing out your borrowing capacity.

Q5: How accurate is this calculator?
A: It provides a good estimate, but actual loan amounts depend on lender-specific criteria and your complete financial profile.