Prospective buyers knowing what they can borrow save time in their property searches.
To become an educate buyer, customers and clients need to have a budget. To this end, the pre-qualifying worksheet is intended to be a guide to helping prospective buyers understand their affordable home price range. It can also provide your maximum borrowing limit. Getting pre-approved for a mortgage enables you to move quickly when you find the perfect place. As a result, the offer will not be contingent on obtaining financing and the seller will know that you are a ready, willing, and able buyer.
Pre-qualification can be performed in person, over the phone, or on the Internet. It usually carries no cost.
Pre-qualifying Worksheet
Please use this tool as a reference only and refer to a qualified lender for all borrowing-related questions.
| Annual income divided by 12 (GMI) | $_____________(1) |
| Multiply GMI by _________% (housing ratio) | $_____________(2) |
| Multiple GMI by _________% (total debt ratio) | $_____________(3) |
| Total monthly debt payments | $_____________(4) |
| Subtract line (4) from line (3) | $_____________(5) |
| Enter the lesser of line (2) of line (5) | $_____________(6) |
| Maximum monthly PITI + payment | |
| Escrow for taxes and insurance (TI) | |
| Multiply line (6) by 25% (avg.) or use actual figures if available | $_____________(7) |
| Subtract line (7) from line (6) | $_____________(8) |
| Maximum principal and interest payment | |
| Divide line (8) by rate factor of _________ | $_____________(9) |
| Multiply line (9) by $1000 | $_____________(10) |
| Maximum mortgage amount (borrowing power) | |
| Cash available for down payment | $_____________(11) |
| Add line (11) to line (10) | $_____________(12) |
| Affordable price range |
As a disclaimer, there is also a difference between pre-qualified for a mortgage and pre-approved for the home loan. First and foremost, the pre-approval process is more involved. It requires a mortgage application, financial background check, and current credit rating. In turn, the borrower will receive a conditional statement for an exact loan amount from the lending institution. You might also be able to lock in a specific interest rate and term length. For these reasons, sellers will place a greater amount of importance on a pre-approved buyer than a pre-qualified buyer.
If you are on the fence about renting or buying, check out this article for real estate trends and the rent or buy calculator.