July 23, 2021
The short answer? The moment you think you want to commit to being a home owner, you should consider using an online mortgage calculator.
A mortgage calculator can help you plan and save for your mortgage. The use of a mortgage calculator is something most real estate blogs and home loan websites encourage you to use.
The most basic, entry-level finance blog advice includes “use a mortgage calculator”.
But there are some things to keep in mind about using a mortgage calculator–you want to use one that includes more than just the principal and interest for your loan.
If you use one that limits the input to just those two things, you won’t really get an estimate of your monthly mortgage payment.
Why?
Because you will need to factor in some important variables, too. Such as the cost of your homeowner’s association fees, property taxes, etc. Here’s an example of a mortgage calculator that has more than just two simple dollar amount inputs.
Using that will get you a lot closer to a real estimate of what you might be paying when the loan closes.
Lenders encourage the use of these apps to help you estimate your monthly payment. But future home owners should also run some additional calculations–don’t just enter the numbers you think you’ll have at closing time, try using a few different approaches to your math.
What kind? Changing up the minimums you enter–down payment, loan amount, etc. Try running variations on the numbers that might be realistic for you and your budget.
What does the calculator say if you have a much tighter budget or, conversely, more money to spend?
This helps you check the affordability of your new mortgage. How might your loan payments work in real life? What happens to your numbers if your run them assuming you might apply for a lower loan amount?
Or a bigger down payment? These are the factors you should experiment with.
Your other costs to consider when thinking of these calculations? We’ve already mentioned homeowners association fees. Another area–your mortgage insurance premium? That is an expense that is easy to home buyer to overlook in the planning stages.
And a mortgage calculator isn’t the only good idea. You should ask your mortgage lender about a closing costs calculator or ask for estimates of what your costs might look like. What is typical?
FHA home loans don’t require private mortgage insurance or PMI, it’s true, but mortgage insurance is still required.
The lender will charge an up-front mortgage insurance premium and a monthly premium (also known as MIP) will be included in your mortgage payment amount.
Be sure to ask the lender what is typical for your mortgage insurance premium. And remember to consider that monthly premium in addition to the home price. You’ll want to get as much information in advance–even if they are just estimates–to help you determine what you can truly afford.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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