When you are ready to purchase a new home, you will find that the house-hunting process can be time-consuming and sometimes difficult. You might want to find ways to narrow down your search, reducing the amount of time and energy you and your agent need to spend.

One way to narrow down your search for the perfect home is to find out what size loan you will likely qualify for. One way you can do that is actually go through pre-qualification with a lender. However, you may not want to take this step right away, as you might want to shop around more after you find the property you wish to purchase.

An intermediate option is to use an online pre-qualification calculator to determine roughly the amount of loan you will be approved for. Of course, any calculator is only a guideline and makes lots of assumptions in its calculations. The first big assumption it makes is that you have adequate credit.

It also assumes that your loan will be a thirty-year fixed rate loan, and that the required housing-expense-to-income ratio is 28 percent and the required total-debt-to-income-ratio is 36 percent. Assumptions about the cost of mortgage-related expenses such as hazard insurance, property tax, mortgage insurance and closing costs are also made.

A typical calculator would operate by requiring you to input your yearly income, the term of the loan you are seeking, and other monthly debt. Using this information and the assumptions mentioned above, the calculator will tell you the price of the home you can afford and the maximum loan for which you can qualify. The formula, per se, is the maximum purchase price minus the down payment amount. In other words, the upfront cost associated with the loan, and the closing costs for acquiring the loan.

These calculators will give you some idea about what the maximum loan you can qualify for, and the maximum cost of your future home, depending on what size down payment you plan to make. While they make too many assumptions to be completely accurate, the calculators give you a ballpark figure to use while looking at the housing market.