BKWeb asked:


What is the formula used to determine the amount of the monthly payment a potential home buyer can afford?

MITCH

2 Responses to “How do lenders calculate home mortgages for prequalifiers? What is formula is used?”

1. Daniel L on November 10th, 2008 3:22 am

   It is complicated. Essentially they put you within ideal ranges. To bankers, everything is a ratio and they compare your ratio to what they consider ideal. They simply want to minimize their risk when lending to you.

   Your interest rate will vary based on the following key factors:
   1) Down payment
   2) Income
   3) Other debts
   4) credit score

   So, total debt to income is one ratio
   loan to home value ratio is another.

2. amccombs on November 10th, 2008 5:35 pm

   each bank has their own formula. i suggest 25% of your monthly net income for mortgage.

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