Your Home Buying News and Resources for Mortgage
Many factors affect your rate including credit scores, loan amount, loan period and type of loan. The Annual Percentage Rate (APR) offers borrowers a comparison tool when shopping. It was designed to measure the real cost of a loan and typically includes points, fees, insurance and pre-paid interest.
When Can I Buy a Home?
According to Experian™, one of the three major credit bureaus, it takes 3 – 6 months of regular activity for a credit score to be calculated. This is great news if you’d like to apply for a mortgage so you can buy a home or make another major purchase soon and don’t want to have to wait forever.
Find out more about rates:
Mortgage Rates by State:
How to calculate your mortgage payments
The arithmetic behind mortgage payments is complicated, but Rate Marketplace’s Mortgage Calculator makes it simple and straightforward.
First, input the price (if you’re buying) or the current value of your home (if you’re refinancing) next to the “Home price” field.
Fill in the amount of your down payment (if you’re buying) or the amount of equity you have (if you’re refinancing) in the “Down payment” column. A down payment is the money you put down when you buy a house, while home equity is the difference between the house’s worth and the amount you owe. You have the option of entering a dollar sum or a percentage of the purchase price.
Then you’ll notice “Loan Length.” Our calculator changes the repayment schedule based on the length you choose – normally 30 years, but it might be 20, 15, or 10 years.
Finally, put the rate you plan to pay in the “Interest rate” box. Our calculator uses the current average rate as a default, but you can change the percentage.
A fresh amount for principal and interest will display on the right as you enter these values. Property taxes, homeowners insurance, and homeowners association fees are also estimated using Rate Marketplace’s calculator. As you browse for a loan, you can change or disregard these figures – they’ll be rolled into your escrow payment, but they won’t effect your principal and interest while you’re weighing your options.
With our Mortgage Payment Calculator, enter in your loan amount, interest rate, term, and down payment to calculate your monthly mortgage payment.
How a mortgage calculator can help
Determining your monthly house payment as part of your housing budget is critical because it will likely be your largest recurrent expense. Rate Marketplace’s Mortgage Calculator lets you estimate your mortgage monthly as you hunt for a buy loan or a refinance. Simply change the details you enter into the calculator to investigate various possibilities. The calculator can assist you in making the following decisions:
The loan term that is ideal for you.
A 30-year fixed-rate mortgage is generally the best option if your budget is set. These loans have lower monthly payments, but you’ll end up paying more interest over the life of the loan. A 15-year fixed-rate mortgage minimizes the total interest you’ll pay, but your monthly payment will be greater if you have some room in your budget.
If an ARM is a viable alternative.
Adjustable-rate mortgages (ARMs) have mostly vanished with fixed rates reaching all-time lows. However, when interest rates rise, an ARM may be a better alternative for some. If you only expect to stay in your house for a few years, a 5/6 ARM — which has a fixed rate for five years and then adjusts every six months — might be the best option. Keep in mind, though, how much your monthly mortgage payment can change once the introductory rate ends.
If you’re spending more money than you have.
The Mortgage Calculator gives you an estimate of how much you’ll pay each month, including taxes and insurance.
How much should be put down?
While a 20% down payment is considered normal, it is not needed. Many borrowers only put down a 3% deposit.
Understanding your mortgage payment
The principal and interest make up the majority of your mortgage payment. The main is the amount you borrowed, and the interest is the amount you pay the lender for the privilege of borrowing it. Your lender may also collect a monthly escrow payment to put into escrow, which the lender (or servicer) normally pays directly to the local property tax collector and your insurance company.
Typical costs included in a mortgage payment
This is the amount of money you borrowed from the bank.
This is the fee that the lender charges you in exchange for lending you the money. Interest rates are stated as a percentage of a year’s income.
Taxes on real estate:
Your property is subject to a yearly tax imposed by the local government. With each monthly mortgage payment, you pay around one-twelfth of your annual tax bill if you have an escrow account.
Insurance for homeowners:
Fire, storms, theft, a tree falling on your house, and other dangers can all be covered under your insurance policy. If you live in a flood zone, you’ll need a separate coverage, and if you live in Hurricane Alley or earthquake country, you might need a third. You pay one-twelfth of your annual insurance premium each month, just like property taxes, and your lender or servicer pays the premium when it’s due.
If your down payment is less than 20% of the purchase price, you’ll almost certainly be required to pay mortgage insurance, which will be added to your monthly payment.
Deciding how much house you can afford
Follow the tried-and-true 28/36 percent ratio if you’re not sure how much of your salary should go toward housing. Most financial counselors agree that people should spend no more than 28% of their gross income on housing (i.e., your mortgage payment) and no more than 36% on overall debt, which includes mortgage payments, credit cards, school loans, medical bills, and other debt. Here’s an example of what I’m talking about:
Joe is paid $60,000 per year. This equates to a gross monthly income of $5,000. Total monthly mortgage payment: $5,000 x 0.28 = $1,400 (PITI)
Joe’s total monthly mortgage payments should not exceed $1,400 per month, including principal, interest, taxes, and insurance. This equates to a maximum borrowing amount of $253,379 dollars. Although you can qualify for a mortgage with a debt-to-income (DTI) ratio of up to 50% for some loans, if you strain yourself too thin, you may not have enough wiggle room in your budget for other living expenses, retirement, emergency savings, and discretionary expenditures.
When lenders preapprove you for a loan, they don’t take those budget items into consideration. You’ll have to factor them into your own housing affordability picture. Knowing what you can afford can assist you in making wise financial decisions. Even if a lender is ready to lend you the money, the last thing you want to do is commit to a 30-year home loan that is too pricey for your budget. The How Much House Can I Afford Calculator from Rate Marketplace will assist you in crunching the figures.
How to lower your monthly mortgage payment
If the monthly payment shown in our calculator appears to be too high, you can attempt several strategies to lower it. Experiment with a few of these options:
Choose a loan with a longer term.
Your payment will be lower if you borrow for a longer period of time (but you will pay more interest over the life of the loan).
Spend less money on your property.
A reduced monthly mortgage payment is the result of borrowing less.
PMI should be avoided at all costs.
A 20% down payment (or, in the case of a refinance, equity of 20% or more) eliminates the need for private mortgage insurance (PMI).
Look for a loan with a lower interest rate.
Some ultra-low rates demand you to pay points, which is a one-time fee.
Increase your down payment.
This technique is used to cut the loan’s size.