Calculating You Monthly Payments
Calculating your monthly payments
Even when you find the perfect home builder, One of the most important factors to consider when building a new home is affordability. As a general rule, mortgage payments should not exceed 30-40 percent of your monthly take-home pay. When calculating affordability for FHA loans you can use 45% of your monthly income for service debit that would show on your credit report and the balance would be what you can afford to pay for a monthly home payment. For example lets say you make $4,500 per month. 4500 x .45= $2,025.00 for service debit. Between your monthly payments for credit cards and car loan you pay $325 per month. $2,025.00 - $325.00 = $1,700.00 this is what you would be allowed to go up to for a home loan monthly including taxes and insurance.
Figure Out How Much You Want To Borrow
Your first step to calculating your monthly mortgage payment is knowing how much you want to borrow. This can be determined by subtracting your down payment amount from the home building price of the home, which will give you the amount that you will need to request from a lender. Contacting a home builder to confirm a total package price will be an important step.
Know Your Rates
The next step is to determine the current interest rates for the purchase of a home. Rates vary and may change often, so check with your lender for current rates. It's worth noting that the interest rates you receive will, in part, be based on your credit history. This means that knowing your FICO score and credit rating will give you a good idea as to how your interest rates will be calculated.
Choose Your Loan Term
Your monthly mortgage payments will be determined by a number of factors, including the term of your loan. If you were to borrow $250,000, your monthly payments would be less with a 30-year mortgage than with a 15-year mortgage. The reason is because it would take larger monthly payments to get the loan paid off quicker, which is why you will need to select a loan term before calculating your payments. But, Keep in mind this is for your end or final mortgage loan, when building a new home you will start out with a temporary construction loan which will have a much different term.
Additional Costs To Consider
Your total mortgage payment will include taxes, homeowner's insurance and possibly even private mortgage insurance (PMI) if you provide less than 20 percent down and your loan requires it.
Just The Facts & Figures
Now that you know how much you need to borrow, have chosen your loan term and are familiar with the current interest rates, it's time to calculate your payment. Most lenders offer a mortgage calculator on their Web site or you can get an estimate by speaking with your lender. This is a simple process and your home builder will be happy to help along the way.
If you still need help in calculating your potential monthly mortgage payments, don't hesitate to ask your real estate agent, mortgage broker or lender.