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How To Use a Mortgage Payment Calculator

Written By: Travis Carter : Loan Options

A mortgage payment calculator is one of the most popular searches on Google. It seems every prospective home buyer is looking to the web to estimate how much they will pay when they purchase a house.  The interest is understandable. The internet and marketing channels have a way of underestimating mortgage payments to get customers in the door. The truth is that a mortgage payment is far more complicated than a mortgage calculator’s capabilities.  By using the steps below, you should be able to calculate your own mortgage payment calculation and KNOW before you OWE. While we offer loan quotes for all of the properties our clients are interested in, we understand that not all banks do this. Therefore, we invite you to use us as a resource and keep us in mind for any of your financing needs.
 

 

What Goes In To a Mortgage Payment Calculation

1. Real Estate Taxes

Although most clients focus their attention on a loan amount and interest rate, the property is a better place to focus your attention. If you are using government financing (VA, USDA, or FHA) it is likely that the real estate taxes will be included in the mortgage payment. For every property, the taxes will be different. To accurately calculate the mortgage payment you will need to use 1/12th of the annual real estate taxes. If you do not know what the taxes are, give us a call at (518) 324-5544 and we can look them up for you, free of charge.  The taxes are part one of the mortgage payment.

2. Homeowners Insurance

Homeowners insurance (AKA Fire Insurance) is a requirement when you finance a home. In order to calculate the mortgage payment you will need to know how much the annual homeowners insurance policy will be. We understand that this is not always known up front but it is certainly a topic worth investigating. Call around. Talk to some insurance companies to get an idea of how much homeowners insurance will be. You will need to add 1/12th of the homeowners insurance policy to your mortgage payment.

It may be better left unsaid, but I am sure you can understand why a mortgage calculator might not be the most accurate tool available to calculate a mortgage payment

Continued Below

 

About Me

Travis Carter PLattsburgh Mortgage

Travis Carter – Branch Manager

I have been in the mortgage business for over 18 years. Since joining my first mortgage company in 2000, I have focused on providing a better mortgage experience. I have managed and trained 30+ mortgage professionals since starting my career. I specialize in first time homebuyer loans including FHA, VA, USDA, and Conventional financing. My goal is to never stop learning and test new financial strategies so I can pass this knowledge on to my clients.

If you have questions or would like to apply for a first time homebuyer loan, I can be reached at travis@plattsburghmortgage.com 

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3. Mortgage Insurance

FHA loans are technically considered a low down payment program however, the down payment can be in the form of a government grant or gift from a family member.  The Federal Housing Administration was created in 1934 to spread homeownership by offering more flexible credit standards. 
 
FHA backs the loan so that the bank does not have excessive losses if the loan goes bad.  If you have a credit score as low as 500 you could still qualify for FHA.  Only a few lenders will allow this but technically the program does allow for a credit score this as low as 500.
 
A down payment of 3.5% down is needed to obtain FHA financing. Although technically not a “no money down” loan, there are many government grants available to help with the down payment.  Gift funds are also allowed for the down payment. A gift from a relative is acceptable but make sure you follow the very specific documentation requirements. Receiving cash as a gift can make the process much more difficult. If you intend to receive gift funds, be sure to talk to your lender about the documents they will need. 
 
FHA loans have some of the lowest interest rates in the country making your home purchase even more affordable. Although FHA has higher mortgage insurance than USDA and VA, it may be the best option if you do not credit qualify for them. FHA typically accepts a higher than average debt ratio meaning you may qualify for more house by using FHA.

Do All Loans Require Mortgage Insurance?

Does the loan you are obtaining require you to pay mortgage insurance?  FHA, USDA, and even Conventional loans (if you put less than 20% down) require monthly mortgage insurance payments. Each loan program has a different amount if insurance that is required. If you need to know the exact amount of mortgage insurance, give us a call. We can calculate this for you based on the type of financing you are using to buy the home. While some more advanced mortgage calculators may include a section for mortgage insurance, are you sure you know how much that is? We have some great articles on specific loan programs to help you calculate this if you can’t find the time to give us a call.

4. The Loan Amount

I’ll bet you thought calculating a loan amount was the easy part. Unfortunately, it isn’t.  Every loan program is slightly different and some loan programs require an upfront mortgage insurance premium to be paid. Although the amount is financed, it does increase the loan amount slightly. AN example of this is an FHA loan. If you were to purchase $100,000 home with FHA and put $3,500 down, the loan amount would not be $96,500. Because of the upfront mortgage insurance premium, the total loan amount would actually be $98,188.75.  By entering the wrong loan amount in a mortgage calculator, you could easily be misled into thinking a loan amount or payment would be less than it is. Luckily, with one phone call we can give you all the information you need. If we know the loan program you are using we can easily calculate the mortgage insurance premium for you. By knowing the correct loan amount based on your down payment, a mortgage calculator can be much more helpful.

 

5. The Interest Rate

The interest rate might be one piece of information that you know and is set. If you have talked to a bank and learned what interest rate they offer, you can feel comfortable entering this in a mortgage calculator and getting a proper result. However, if you have not talked to a mortgage company or do not know which loan program you will be using, it may be better to consult a mortgage company. Depending on your qualifications, the amount of money down, or credit rating the interest rate can vary greatly. Many mortgage companies or marketing companies (AKA Zillow/Bankrate) advertise the lowest possible interest rate based on the best credit score with 20% down in order to get customers in the door.  While every client deserves the best available interest rate, make sure you know what interest rate you qualify for before using a mortgage calculator. If you want to find out the interest rate you qualify for today, simply visit our purchase qualifier.  To learn more about how interest rates are calculated, click here.

If, after reading this article you feel confident in using a mortgage calculator the mortgage calculator is below. If not, give us a call any time at (518) 324-5544

 

Let Us Calculate Your Mortgage Payment For You!

We can complete the Mortgage Payment Calculator for you!  CLICK HERE! We will be in touch shortly

 

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