Use this calculator as your first step in determining your ability to qualify for a loan. Now, as per the quantitative requirement, he can avail loan of up to $135,310.02, whereas Bank will offer a net $123,500 only per qualitative and quantitative requirements and the difference he would need to arrange by himself or he can consider another bank for a loan. He is ready to make a down payment of up to 20% of the value of the property. We now have a rate of interest as 6.95%, and if compounded monthly, then the rate would be 6.95%/12, which is 0.58%, The desired loan will be reduced by 35% as his DGPI is greater than 36%, which shall be $200,000 x ( 1 – 0.35), which is $130,000, Since his credit score is in the range of 721 to 745, he can avail 95% of the loan. $2,000 is his gross income, less existing debt payment $455, and $500 towards the home expenditure, and hence remaining net income would be $1,045, which he can use to pay the installment amount on the proposed loan. You may also take a look at the following useful articles –, Copyright © 2020. Loan Prequalification Calculator can be used to calculate the Prequalification amount that the borrower would be able to borrow provided his annual income and his other factors such as whether any down payment would be made or any existing loans etc. Step #8 – Now use the present value formula to determine what loan amount would be eligible for the borrower to borrow. Based on the given information, you are required to recommend what loan amount he can borrow and whether it meets its requirement of funds? We need to calculate the rate of interest first, which shall be applied towards his loan. If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware. The Bank’s marginal cost of the capital rate at the moment is 6.95%. All Rights Reserved. We shall now determine what is the net income of Mr. Christopher before the proposed new debt payment. Because of this loan amount will impact which we will calculate later on. Another way to prevent getting this page in the future is to use Privacy Pass. He will be providing his home as security to the bank, which values around $120,000. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy, Download Loan Prequalification Calculator Excel Template, Learn from Home Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) View More, You can download this Loan Prequalification Calculator Excel Template here –, Financial Modeling Course (with 15+ Projects), 16 Courses | 15+ Projects | 90+ Hours | Full Lifetime Access | Certificate of Completion, Loan Prequalification Calculator Excel Template, D is the total debt payment per period, including the proposed loan repayment amount, PV is the present value of loan recommendation. Step #2- Check the terms and conditions and rules of the financial institution through which the loan is sought after. Currently, he has $455 as his existing debt payment and, he has a credit debt of $5,000 as outstanding. Are you currently paying off any existing debt that could have an impact on your ability to qualify for this new loan? This will depend on case to case, as stated earlier. In addition to helping you figure out how to qualify for a home loan, we’ve broken down the terms and sections of our loan prequalification calculator. It is, however, a good starting point in figuring out if you can get pre-approval for a home loan. Here we provide you the calculator that is used to calculate the Prequalification amount that the borrower would be able to borrow with an example. Mortgage prequalification is an informal evaluation of your creditworthiness and how much home you can afford. He wants the tenure to be for 20 years and wants to make monthly payments of installments. Mortgage Affordability Calculator by Payment Prequalifying for a mortgage is a helpful step if you’re looking to buy a home. The formula to calculate GDPI Ratio that most of the financial institution use as one of the criteria is per below: There is no one mathematical formula that can determine the pre-qualification loan amount as it is based on quantitative and qualitative factors such as Debt to income ratio, which should be ideally less than 36%, then if any down payment is to be made by the borrower, or any default has been made by the borrower or the security that has been offered.