Best Pre Approval Mortgage Calculator

Reviewed by David Chen, CFA | Mortgage Pre-Approval Specialist | Last Updated: November 2023

Ready to house hunt? Use this best pre approval mortgage calculator to estimate your borrowing power based on your income and debts, giving you a realistic price range before you talk to a lender.

Pre-Approval Estimator

Financial Profile

Gross Annual Income

Please enter a valid annual income.

Monthly Debt Payments

Cars, student loans, credit card minimums.

Available Down Payment

Loan Assumptions

Interest Rate (r)

Please enter a valid interest rate.

Loan Term (n)

Years

Please enter a valid term.

Est. Monthly Tax & Insurance

Reduces borrowing power if high.

Maximum Home Price

$0.00

Max Loan Amount: $0.00
Max Monthly Housing: $0.00

Best Pre Approval Mortgage Calculator Formula

This calculator works backward from your income to find your maximum home price using the Debt-to-Income (DTI) ratio, typically capped at 36% for conservative estimates:

Max Housing Payment = (Monthly Income × 0.36) – Monthly Debts

Once the Max Housing Payment is found, we subtract Taxes/Insurance to get the Max Principal & Interest (P&I), then solve for the Max Loan Amount:

Max Loan = Max P&I [ (1 + i)^n – 1 ] / [ i(1 + i)^n ]

Source: CFPB: Mortgage Qualification

Variables

Monthly Income: Annual Gross Income / 12.
36% DTI: Standard back-end ratio limit (can vary by lender).
Max Housing: The maximum PITI payment you qualify for.
P: Max Loan Principal.

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What is the Best Pre Approval Mortgage Calculator?

The best pre approval mortgage calculator is one that provides a realistic estimate of your borrowing power by accounting for existing debts. Unlike a simple payment calculator, it evaluates your financial health through the lens of a lender.

While only a bank can issue an official pre-approval letter after verifying your documents, this tool simulates that underwriting logic to give you a solid price range for your home search.

How to Calculate Pre Approval Amount (Example)

Scenario: Income $96,000/yr ($8,000/mo) with $600/mo in debts.

Max Total Debt (36%): $8,000 × 0.36 = $2,880.
Max Housing Payment: $2,880 – $600 = $2,280.
Adjust for Escrow: Subtract $500/mo for taxes/ins = $1,780 available for P&I.
Max Loan (6.5%, 30yr): A $1,780 payment supports a loan of roughly $281,500.
Max Price: Loan ($281,500) + Down Payment ($50,000) = $331,500.

Frequently Asked Questions (FAQ)

What is the difference between pre-qualification and pre-approval?

Pre-qualification is an estimate based on self-reported data (what this calculator does). Pre-approval is a verified commitment from a lender after reviewing your credit report and financial documents.

Does this calculator affect my credit score?

No. This is a self-help tool that does not require your social security number or perform a credit check, so it has zero impact on your credit score.

Can I get approved for more than 36% DTI?

Yes. While 36% is a safe conservative benchmark, many Conventional loans allow up to 45% DTI, and FHA loans can sometimes go higher. However, borrowing at your absolute max limit leaves less room for other expenses.

Why do taxes and insurance lower my loan amount?

Lenders look at your total monthly housing expense (PITI). Money spent on taxes and insurance is money that cannot be used to pay down the mortgage principal, thus reducing the size of the loan you can afford.