Loan Prequalification Calculator

Get a rough estimate of how much you *might* be able to borrow.

Estimate Your Potential Loan Amount

Exclude current rent/mortgage if replacing it with the new loan payment. Include if keeping it.
Maximum percentage of your gross income lenders allow for total debts (including the new loan). 36-43% is common.

Understanding Loan Prequalification

Loan prequalification is an initial, informal step in the borrowing process. It gives you a ballpark idea of how much money you *might* be eligible to borrow based on basic financial information you provide, primarily your income and existing debts.

Prequalification vs. Pre-Approval:** It's crucial to understand the difference:
  • Prequalification: A quick estimate based on self-reported data. Not verified by the lender and not binding. It's a starting point.
  • Pre-Approval: A more formal process where the lender verifies your financial information (income, assets, debts) and checks your credit. A pre-approval letter carries more weight and indicates the lender is likely willing to lend you a specific amount, subject to final conditions (like property appraisal).

How This Calculator Estimates Prequalification

This tool uses a common approach based on the **Debt-to-Income (DTI) ratio**:

  1. Calculates Max Allowable Debt:** It determines the maximum total monthly debt payment (including the potential new loan) a lender might allow based on your gross monthly income and the target DTI ratio you enter (e.g., 43%). `Max Debt = Income * (DTI / 100)`
  2. Calculates Room for New Payment:** It subtracts your existing monthly debt payments from the maximum allowable debt to find how much is potentially available each month for the *new* loan payment. `Available = Max Debt - Existing Debts`
  3. Estimates Loan Amount:** Using the available monthly payment amount, the estimated interest rate, and the desired loan term, it works backward using the loan payment formula to estimate the principal loan amount you might support with that payment.

Factors NOT Included

Remember, this simple estimate doesn't consider vital factors lenders use:

  • Your Credit Score & History
  • Savings & Assets
  • Employment History & Stability
  • Down Payment
  • Specific Lender Overlays & Guidelines
  • Loan Program Rules (e.g., FHA, VA, Conventional)

How to Use This Calculator

  1. Enter your **Gross Monthly Income** (before taxes).
  2. Enter your **Total Monthly Debt Payments** (sum of minimums/payments for credit cards, student loans, auto loans, personal loans, etc. *excluding* housing if this new loan replaces it).
  3. Enter your **Desired Loan Term** in years.
  4. Enter an **Estimated Interest Rate** you think you might qualify for.
  5. Enter a **Target DTI Ratio** (e.g., 43%) that the lender might use.
  6. Click "Estimate Prequalification".
  7. Review the **ESTIMATED** loan amount and payment, keeping the significant limitations and the **IMPORTANT DISCLAIMER** in mind.

**This tool is for planning and informational purposes only. For a realistic assessment of your borrowing power, contact a lender and go through the pre-approval process.**

Ready for the Next Step?

Prequalification is just an estimate. Talk to a Blue Sky Loans specialist or apply for pre-approval to get a clearer picture of your borrowing options.

Apply for Pre-Approval