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Prequalifying for a home loan is the first step of the mortgage application process. To quickly estimate your monthly payment, use Forbes Advisor’s mortgage prequalification calculator. Simply enter some basic details about your current financial situation and desired home value to help determine how much house you can afford.
How To Use the Prequalification Calculator
To best determine your home affordability, enter your:
- Loan amount. The desired amount you wish to borrow to buy a home.
- Down payment. Include your planned down payment. A higher initial contribution reduces the amount you need to borrow and your ongoing monthly payment.
- Interest rate. The estimated interest rate for your loan. Be sure to regularly compare current mortgage rates as they change daily.
- Loan term. The number of years you have to make payments. Most borrowers opt for a 30-year fixed-rate term with 360 monthly payments.
- Annual income. Your combined estimated annual pre-tax income from all borrowers. This figure primarily calculates any W-2 and self-employment income. Depending on the lender, it can also include government benefits (such as Social Security income) and rental property income.
- Total monthly debt payments. Enter your current minimum monthly payment for all existing auto, student, personal loans and credit card balances. If this loan isn’t replacing an existing mortgage, include your current home loan payment too.
- Credit score range. Your credit score influences your mortgage rate. Homebuyers with an excellent score—from 740 to 850—typically qualify for the best rates.
What Is Mortgage Prequalification?
Mortgage prequalification is the initial step of qualifying for a home loan where you self-report financial details such as your annual income, current monthly debt payments and down payment amount.
The lender won’t verify your personal information but usually runs a soft credit check to provide a basic quote, giving you an estimate of your monthly payment and the maximum loan amount without impacting your credit score.
Prequalifying with several top-rated mortgage lenders will help you get the best rate and term once you’re ready to buy. New and experienced borrowers can also work with a loan officer to review their loan options and maximize their purchasing power.
Many lenders will provide an initial rate quote within a matter of minutes, but you may need to speak with a loan officer first. After getting prequalified, you’ll receive a prequalification letter that can make it easier to work with sellers and real estate agents when you submit an offer.
What’s the Difference Between Prequalification and Preapproval?
Prequalification is the first and easiest step of getting a mortgage as the process requires minimal paperwork and typically doesn’t impact your credit. It’s best for evaluating your mortgage options and loan limits.
However, most lenders require you to apply for mortgage preapproval to receive a personalized rate quote and more accurately determine your loan amount, interest rate and monthly payment. This step requires a hard credit check and thorough examination of your financial details.
Getting preapproved for a mortgage can take up to 10 business days to verify your documentation and provide a mortgage preapproval letter valid from 30 to 90 days. Because the preapproval process verifies your financials, sellers are more likely to accept these offers first.
If you’re ready to buy a home within the next few months, taking the extra step to get preapproved can be well worth your time.
It’s important to note that neither prequalification or preapproval is a commitment to lend as you must formally apply for a home purchase loan after the seller accepts your offer.
What’s Behind the Prequalification Calculation?
This loan prequalification calculator uses your preliminary financial data and loan details to estimate your ability to afford a mortgage for your target home purchase price.
Several factors affect your loan limits and monthly payment, such as:
For personalized rate quotes, you’ll need to apply directly with a lender and supply further documentation.
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Does Prequalification Affect Your Credit Score?
Prequalification typically won’t hurt your credit as most lenders only perform a soft inquiry or ask for your credit score range to provide a loan estimate. However, it’s still a good idea to verify with the lender beforehand if its prequalification process will affect your credit score.
As this task likely won’t impact your credit, it’s easy to get a ballpark estimate about your potential mortgage amount at the start of the house hunting process.
Further, you can use these preliminary details to find an affordable home and improve your finances to qualify for a competitive rate.
How Long Does It Take To Get Prequalified for a Mortgage?
Most applicants receive an instant decision online or by phone after applying for mortgage prequalification. Some lenders may take a few business days to get back to you.
The prequalification process can take 20 minutes or less, although some lenders may require up to an hour to review your situation.
You can expedite the process by having these details ready:
- Estimated annual income
- Estimated monthly debt payments
- Social Security number or individual taxpayer identification number (ITIN)
- Intended down payment
