Maximum Mortgage Calculator
Before shopping for your new home, you will want to establish the maximum amount you are eligible to receive for a loan. This figure is reached through an assessment of your gross pre-tax income in relation to your recurring monthly debt payments.
Using a maximum loan calculator is a good place to start when getting an estimate of how much you can take out with a mortgage loan. Hero Loan is here to break down how the VA’s loan program will affect the maximum loan amount you are able to receive.
How Does Your Debt-to-Income Ratio Affect Your Mortgage Loan Limit?
A portion of your VA loan (25%) comes with a federal-backed guarantee. This is one reason lenders love the VA loan program, as the borrower poses less risk of defaulting on their loan. The VA has implemented established guidelines for lenders to abide by when instating this lending service as the VA itself doesn’t issue the loan. As long as the guidelines are followed, the lender receives the guarantee. One of the stipulations of the VA’s guideline is there is a set limit on how much you are able to borrow with your loan. This amount is determined based on your debt-to-income (DTI) ratio.
For the VA’s loan program, your DTI ratio cannot exceed 41%. It is calculated by multiplying your monthly salary by .41. Next, you will add up your monthly recurring debts and monthly housing payments. The total reached cannot exceed the figure you calculated for your DTI ratio based on your monthly salary.
For example, if your salary is $6,000 per month, to calculate the limit on your DTI, you would multiply this number by .41.
$6,000 x .41 = $2,460.
This means that your monthly mortgage payment and recurring monthly debts cannot exceed this amount.
You are under no obligation to take out the maximum loan amount you might qualify for. It is still recommended not to bite off more than you can chew when it comes to monthly payments and create a financial plan of action that falls within your budget.
How to Use a Mortgage Capacity Calculator?
Enter information into the fields below to calculate your maximum mortgage limit. The more accurate your information, the more precise your estimate will be, giving you a more realistic figure of what to expect when shopping for a house. If you are signing a loan with a co-borrower, be sure to input their financial information into the correct fields.
- Pre-tax Gross Monthly Income. This is your steady source of income each month before taxes. It can include other sources of revenue outside of your primary salary like a side hustle, rent received, bonuses, dividends from investments, alimony or child support, and financial support received from entitlement programs.
- Monthly Liabilities. These are your recurring monthly debt payments. This input can include auto loans, student loans, credit card payments, alimony and child support, or other types of consumer debts that show up in the form of installments. Note that monthly bills such as utility bills, cell phone bills, food, and entertainment are not counted towards your monthly debts.
- Monthly Housing Payment. The principal, interest, property taxes, and insurance (PITI) are included in your monthly housing payment. Although the VA’s loan limit allows for a DTI ratio of 41%, your PITI should only consume around 28% of that amount to leave room to pay off your monthly liabilities.
- Maximum Principal and Interest (PI). Your maximum monthly principal and interest payment is calculated by subtracting your monthly taxes and insurance from your monthly PITI payment. Your maximum PI payment is used to determine the mortgage amount that you could qualify for.
- Starting Interest Rate. This is the interest rate you believe you will receive on your mortgage. Eligible veterans, military service members, and surviving spouses usually benefit from more advantageous rates and terms on their loans. Interest rates on VA loans currently hover between 2.6% and 3.1%.
- Loan Term (in years). This is the period over which you will repay your loan. Most loan terms come at intervals of 15 or 30 years; however, 10 year and 20-year loan terms are also possible. Shorter loan terms require more aggressive monthly payments but can save you thousands of dollars otherwise spent on interest over the life of your loan. Longer loan terms offer more affordability with lower monthly payments.
The VA loan program also includes a funding fee that is charged to ensure the continuity of this program so that other eligible military service members may benefit from it down the road. For first-time VA loan usage, the funding fee is set at 2.3% of the total loan amount. Subsequent usage of a VA loan increases the VA’s funding fee to 3.6%, but it can be lowered with a down payment of 5%.
How Can Hero Home Loan Help?
Hero Loan is on a mission to get our veterans, active-duty service members, surviving spouses, and their families the best deal possible on a loan. We are committed to assisting you to create a financial plan of action that will get you into your dream home. Understanding your maximum mortgage limit will define your home-shopping parameters by defining your budget.
You will probably have questions about your maximum mortgage limit that a calculator cannot answer. That’s why we’re here! Our team of friendly lending Experts, coming from the same communities we serve, offers a personalized, relatable customer service experience.
Beyond serving you as lending service representatives, we are proud to support our community of military service members by frequenting veteran-owned businesses and events. We also contribute to the efforts of the Fisher House project, a foundation that provides complimentary accommodation to the families of veterans undergoing medical procedures.
So give us a call today at 866-222-0219 to speak with a representative who can help you determine your maximum mortgage amount. Once we have figured out that number, our in-house underwriting process can efficiently and painlessly get you approved on your loan in as little as two weeks. You can also reach out to us through our live chat service to get started on the process of finding your dream home today!