The borrowing power calculator is, along with the monthly payment calculator, the most popular home loan calculator. Home buyers use the borrowing power calculator to answer the simple question, “how much can I afford to borrow?” This is an important question, since the first criteria in running a search for available homes is price range. This calculator is vital because if you don’t know how much you can really afford overall, how can you even start searching for a home? Also, how can you ask for a loan without knowing how much you need? The borrowing power calculator takes the guess work out of this part of the loan process easily.
To use the borrowing power calculator, a prospective home buyer needs to enter income status, the details of their current expenses, and the details of the expected loan. For personal income status, you will need to list whether you have a joint or single income in your household and how many dependants you have. After that, you will be required to list the details of all salaries in the household and any other net income. From there, you will list your expense details. This is where preparation is very important. You need to take an honest accounting of your debts and expenditures on a monthly basis. For the calculator, you will list outstanding loan payments, such as auto and personal loans, credit card debt and any other regular payments you may have. This way, the borrowing power calculator knows how much extra money you have on a monthly basis to put toward a loan.
The final piece of borrower supplied data in the borrowing power calculator is loan details. Here you will need to decide the term of the loan and then select an interest rate. For this step, research lenders to get an idea of what rates are currently available. Since you don’t know the exact rate you’ll end up getting, you should run the calculator a few times with different rates in order to get a range of results. That way you won’t be caught off guard by a number you didn’t expect.
Once all this information has been entered, the borrowing power calculator will give you an idea of the total loan amount you can afford. Please remember that this is only a guide and not a 100% accurate listing of your ability to buy a home. This is why it’s good to run any calculator several times. You can get a range of your buying power, and then start shopping for homes in that range.
Important: This calculator is provided to be use as a guide only and should not be considered a quote, a loan offer, or investment advice. Other criteria may need to be considered, and before taking out a loan you should always consult with your personal financial adviser.