How To Estimate A Monthly Mortgage Before Buying A Home

How to estimate a monthly mortgage before buying a home. You can estimate your monthly mortgage payment depending on how much loan you can qualify for. While it is not set in stone how much your monthly mortgage...

While it is not set in stone how much your monthly mortgage payments will be if you haven't been approved for a home loan yet, there are a few simple formulas you can use to help you come up with a ballpark figure on what you should expect to pay.

The first thing you want to do is to calculate the monthly mortgage payment (including principal and interest) based on the amount of the mortgage, the term of the home loan (the number of years the mortgage is for) and the interest rate. There are several real estate websites out there that have mortgage calculators you can use to enter in the date and end up with an estimate of the monthly interest/principal amount. The next thing you need to do is figure out how much you will have to pay in annual property taxes, and divide the amount by 12. You will them add this amount to your interest/principal amount. Now you should add in the cost of your annual homeowner's insurance premium, divide this number by 12 and add this on to the monthly payment. If you put less than 20% down on the house, you will be required to purchase private mortgage insurance, or PMI. If this is the case, you will need to divide the total dollar amount of this policy by 12 and add it on to your monthly payments as well.

Your monthly mortgage will include your interest, principal, insurance and taxes added together. While you are not required to factor in your taxes or insurance in your monthly payment, it is strongly recommended because this insures that the insurance and taxes are paid and that you are not overwhelmed by a large lump sum payment.

As stated earlier, this is a crude estimate, which can change depending on your personal situation, the interest rates and the type of loan you are receiving. The monthly payment on a $250,000 interest-only home loan is going to be considerably lower than a fixed-rate loan for the same amount. Another thing to remember is that the interest rate you may be using to calculate your mortgage may not be the interest rate that you qualify for. Depending on the economy, your income and your credit situation, the interest rate that you actually receive may be higher or lower. Even the smallest difference in interest rates can make a huge difference in terms of what you are going to pay every month.

Because there are so many variables involved, it is recommended that you have a better idea for a loan so you have a better idea of how much you will have to pay. Richard Fryer, president of IFEC real estate school, is an expert with over 30 years of experience in the real estate field, and he also agrees that persons should try to get approved as soon as possible so that they will have a better idea of what to expect. "[The amount of your monthly mortgage payment] depends on how much loan you can qualify for. That's why I say it is best to start with getting the loan approved first, because then you know how much you can borrow. And that's pretty much going to pigeonhole you in a price range."

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