Mortgage Payment Calculator
Online mortgage payment calculators are handy and can allow the First Time Home Buyer to dream about their new home and then see if they can really afford it.
These calculators are online and will allow you to enter the price of the home, pick and interest rate and a term for the loan; 15 year, 20 year, 30 year. Then the calulator will present you with the monthly payment that you would have to pay to own a home at the price entered.
Keep in mind that your payment is made up of principal and interest, escrow amount for taxes and insurance and unless you are putting down 20% of your purchase price, a PMI payment.
PMI will vary depending on the type of loan that you are obtaining. The lowest PMI is generally for an FHA type loan and that is .5% per month.
If you want to play with a mortgage payment calculator visit: Mortgage Loan Payment Calculator
Affordability Calculator
Even if you think you can afford the house payment that you came up with in your previous payment calculator iterations, the mortgage lender may disagree with you.
This is where something called DebttoIncome Ratios come into play. This means that only a certain percentage of your income can be debt before a lender will consider you a good risk for a mortgage.
There are two percentages involved with DebttoIncome Ratios. One DTI Ratio is that only a certain percentage of your income can be your house payment. This payment includes Principal and Interest, Tax and Insurance Escrow and PMI.
The other DTI percentage is that only a certain percentage of your income can be total debt. This total debt is any payments for debt showing on your credit report plus the proposed new total house payment.
Once again, depending on the type of loan you are obtaining the DebttoIncome Ratios will vary somewhat. An example is that the DTI ratios for a FHA Loan is 29/43 (at the time of this writing). This means that your house payment can’t be more than 29% of your total income and that your total debt can’t be more than 43% of your income.
Debt does not include things like groceries, gas for the car, household utilities, school tutition and fees, etc. That is the reason for a cap of 43%. The lender realizes that the borrower must still have enough money left over after the house payment, the car payment, the credit card payments, etc. to pay for the basic necessities of life.
Use the Affordability Calculator at MortgageLoansMortgageRefinancing.com to see if your income and debt will work for your new dream home.
Paying Discount Points
Lenders will allow a borrower to pay points (upfront interest) at closing to buy down the interest rate they can get on their new mortgage loan.
If you have the cash on hand to pay points, then it might save you a lot in interest over the term of the loan. To help you decide if paying points is best for you, use the Should I Pay Points Mortgage Caculator
Other Mortgage Calculations
Using the mortgage loan calculators you can determine how you might shave years off the term of your loan by paying extra each month toward the principal of your loan. The calculator will also show you how much interest you will save by doing this.
You might also want to evaluate the option of getting an interest only loan. Be aware that these type loans usually require 20% down and above normal credit scores.
