Mortgage Pre-Qualification Calculator

How it works

Prequalification by Income Level

Assumes 20% down, 7% rate, 43% back-end DTI limit.

Pre-qualification, pre-approval, and what a seller actually accepts

These three words get used interchangeably and mean very different things to the person reviewing your offer.

• Pre-qualification is an estimate based on figures you state. Nothing is verified. It is what this calculator does, and it is genuinely useful for setting a budget — but it carries no weight with a seller.
• Pre-approval means a lender has pulled your credit and reviewed income and asset documents, then issued a letter for a specific amount. This is what a listing agent expects to see attached to an offer.
• Underwritten (or “fully underwritten”) approval goes further: a human underwriter has cleared the file, leaving only the property itself — appraisal and title. In a competitive market this is close to cash-equivalent, and it is worth asking your lender whether they offer it.

Use the number below to decide what to shop for. Convert it to a pre-approval before you write an offer, because an offer backed by a pre-qualification is usually the first one a seller sets aside.

What a lender is actually checking

A pre-approval decision comes down to four things, and only one of them is your income.

• Debt-to-income ratio. The one that decides the size of the loan. Lenders look at the housing payment as a share of gross monthly income, and at total debt payments including that housing payment. Conventional loans commonly go to about 45% total, and sometimes to 50% where credit and reserves are strong. Government-backed programs can stretch further with compensating factors.
• Credit score. This sets the rate more than the approval. A stronger score lowers both the interest rate and the mortgage insurance premium if you are putting down less than 20%, which is why a few points either side of a tier boundary can be worth more than a larger down payment.
• Assets and reserves. Not just the down payment and closing costs, but what is left afterwards. Reserves are counted in months of housing payment, and they are often what allows a higher DTI to be approved.
• Income stability. Two years in the same line of work is the usual benchmark. Salaried income is straightforward; self-employment, commission and bonus income are typically averaged over two years, and a declining trend is averaged down rather than up.

Note that lenders work from gross income while you live on net. A number that clears underwriting comfortably can still be more than you want to spend — see what you can afford as distinct from what you can borrow.

Why the approved figure often differs from the estimate

Almost every gap between a pre-qualification estimate and a real pre-approval comes from how lenders count things:

• Overtime and bonus. Counted only with a documented history, and averaged. A strong recent year on its own usually does not count.
• Self-employment. Assessed on net income after business deductions, not on revenue. Aggressive deductions reduce taxable income and reduce borrowing power with it.
• Student loans in deferment. Frequently counted at a calculated percentage of the balance rather than at the $0 you currently pay.
• Co-signed debt. If your name is on it, it is usually your debt for DTI purposes, even when someone else pays it.
• Property costs. Taxes, insurance, HOA dues and mortgage insurance all sit inside the housing ratio, so a high-tax county or a condo with large dues reduces the loan you qualify for at the same income.

Shopping lenders, and protecting the approval once you have it

Comparing lenders does not wreck your credit. Scoring models treat multiple mortgage inquiries made inside a short shopping window as a single event — commonly 14 to 45 days depending on the model — so the practical advice is to concentrate your applications rather than to avoid them. One inquiry and six inquiries in the same fortnight look much alike.

A pre-approval letter typically holds for 60 to 90 days, because the credit report and income documents behind it go stale. Expect to refresh documents if your search runs long.

Between approval and closing, the file is re-checked — often days before completion. Do not open new credit, finance a car, change jobs, or move large sums between accounts without telling your loan officer first. Undocumented deposits are one of the most common causes of a delayed closing, and a new monthly payment can push DTI past the threshold that approved you in the first place.