Buying a home can be expensive, no doubt about it. Even if you have a fantastic job with a great income, knowing how much you can afford to spend on monthly payments can be confusing. This is especially true when you add in tax, insurance, and all of the other additional expenses that pop up when you purchase a house.
One way to get an idea of how much you can afford to spend on a home is to use a mortgage financing calculator. The calculator will have you input different variables and then tell you how much your monthly payment will be. It’s an incredibly handy tool to have when you go to apply for your mortgage financing.
What Kind of Variables Will be on the Calculator?
Almost invariably, the very first thing the calculator will ask you is the amount of your down payment. Right off the bat, it will reduce that amount from your monthly mortgage statement. Also, if your down payment is 20% or more of the final purchase price of the home, you will not have to factor in the price of mortgage insurance.
After the down payment, the calculator will ask about the price of the home you are considering. With this, you have a little bit of flexibility to play around and try out different purchase points. This will give you a rough idea of the price range you should be seeking.
Then, it will ask about your credit. Some will ask about your credit score, others may ask if you simply have good or bad credit. If you have bad credit, your interest rate will probably increase, thus costing you more month by month.
After that, you can set the length of the loan, the interest rate, the taxes due, and other variables. Again, you can type in different numbers to see how it will affect your payments.
What Will the Calculator Tell Me?
Once you type in your variables, the mortgage calculator will then spit out a few numbers back at you. The first thing should be your expected monthly payment on the home. This is really the bottom line and the main number you should be looking at. If you don’t feel like you can comfortably afford this number, you should lower the purchase price of the home.
After that, some calculators will tell you the overall price you will pay for the house, after interest is figured in. Some will also tell you the loan pay-off date, and will give you different options on that based upon how you choose to pay. For example, if you choose to make half your payment bi-weekly, you will typically pay off your loan four to five years faster than if you make one monthly payment.
Are Mortgage Calculators Accurate?
Yes. Technology has come a long way in the last few decades. As long as you set the right variables, the mortgage calculator will be accurate.
Don’t just take our word for it. Be sure to visit Steven Owens at www.mymortgagebroker.com and try out the mortgage financing calculator. While you’re there, he can answer any additional questions you have and get you set up on the process of buying your home.