One of the handiest tools to use when starting to look for your home is the mortgage pre-approval calculator. It will provide you all the information you will need to know and give you some idea of what to expect as you begin the mortgage pre-approval process. By using the calculator, you can expect to have a rough idea of the type of loan for which you qualify, along with your monthly payment and the overall amount of the loan.
How Do I Use the Pre-Approval Calculator?
It's actually quite simple. All you have to do is find one online – nearly every bank or lender has one – and plug in some numbers. Easy as pie.
The first thing it will ask is for your household income. If you are unsure, you can look at a recent paystub or your last tax documents. Next, it will ask about your other liabilities and assets; things like car loans, credit card debt, student loans, and other items that need to be paid off are included here. Remember, the more honest you are with the calculator, the more accurate your results will be.
Once that section is complete, the pre-approval calculator will ask for your down payment. Simply plug in the number you expect to have to pay toward your new home. If it is less than 20% of the purchase price, you also need to factor in mortgage insurance. Next is the interest rate. Typically, the interest rate is somewhere between 3% and 9%, depending on your credit rating and the amount of debt you have. Feel free to play around with this a little bit and see what the different results will be.
Finally, you need to input how long you expect to have the mortgage. In Canada, most mortgages are set for 10, 15, or 25 years. Remember, the sooner you choose to pay it off, the higher the monthly mortgage will be, so be sure to plan accordingly.
What Will the Calculator Tell Me?
Once you put in all of your variables, the calculator will tell you a number of things that will be helpful when you decide to start house hunting. You can use these numbers to then get an idea of the price range of home you should be seeking.
The calculator will tell you the expected monthly payment. If it's too high, you may need to lower your purchase price, up your down payment, lower your interest rate or increase the amortization period.
Next, the mortgage pre-approval calculator will tell you the price of a home you can reasonably afford. Again, if you were honest with the calculator, it will be fairly accurate. After that, it may tell you things like any taxes, fees, or other hidden costs you could expect to pay.
Don't just take our word for it; you can try it out for yourself at mymortgagebrokercalgary.com.
While fun, we should note, however, that this is still not the time to house hunt. It would be better to consult with a mortgage broker and get a pre-approved mortgage before touring homes. You want to be sure you know the true amount you can afford. The brokers at Verico iMortgage Solutions are ready to help. Contact us for a no-obligation consultation.