Buying a home is one of the most costly financial transactions of your life. And how you finance it should not be an impulsive decision. Setting a budget long before you look at homes can help you avoid falling in love with a home that you can’t afford at all. That’s where a simple mortgage calculator can help you.
All that you have to do is to go online and use mortgage calculator Texas. But before you use it, the calculator will ask for a few things. Here are these –
Your home price depends on four things, including your income, credit score, monthly debt payment, and down payment savings. When buying a home, you may hear that there is a rule for percentage, and it is 36%. It means that you should aim to have a debt-to-income (DTI) ratio of about 36% percent when applying for a home loan program. The ratio will help your lender to understand your financial capacity to pay your mortgage each month. The higher the ratio the less likely you can afford the mortgage.
Generally, a 20% down payment is what mortgage lenders expect with no PMI. But it varies in cases of FHA and VA loan programs. Besides, some lenders have programs offering mortgages with down payments as low as 3% to 5%. Being a homebuyer, you should aim to have 20% of your desired home price saves before applying for a mortgage. High down payment enhances your chances of qualifying for the best mortgage rates. Your income and credit scores are two additional factors that will play a role in deciding your mortgage rate.
You can use the interest rate a potential lender provided you when you went through the preapproval process. But if you don’t have an idea of what you’d qualify for, you can put an estimated rate by using the existing rate trends found on the mortgage page of your lender. You should keep this in mind that your actual mortgage rate is based on several factors, along with your credit score and debt-to-income ratio.
And then, you have the option of selecting a 30-year fixed-rate mortgage, 15-year fixed-rate mortgage or 5/1 ARM. As their name suggests, the first two options are fixed-rate loans. It means your interest rate, as well as monthly payments, will remain the same throughout the entire loan. On the other hand, an ARM or adjustable-rate mortgage has an interest rate, which will change after an initial fixed-rate period. Generally, after the introductory period, an ARM’s interest rate will change once a year. Based on the economic climate, the rate can increase or decrease. Most homebuyers chose a 30-year fixed-rate loan. But if you are planning on moving in a few years or flipping the house, an ARM will offer you a lower initial rate.
When using a mortgage calculator, it is not necessary to enter the exact numbers – you can use your best guess. The number can be adjusted later. So, follow the instructions in the calculator and proceed accordingly.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.