An online mortgage calculator can help with your monthly mortgage payment estimation with little details. In addition, it can highlight the total amount of interest over the lifetime of the mortgage.
The initial cash payment, usually represented as a percentage of the total purchase price, a home buyer makes when purchasing a home. For example, a 20% down payment on a $200,000 house is $40,000. A 20% down payment typically allows you to avoid private mortgage insurance (PMI). The higher your down payment, the less interest you pay over the life of your home loan. The best way to pay for a home is with a 100% down payment in cash! Not only does it set you up for building wealth, but it also streamlines the real estate process.
The dollar amount you expect to pay for a home. According to the US census, Over the past 50 years, the average price of a new home in the U.S. rose from $19,300 in 1963 to $76,400 in 1980 and skyrocketed to $394,000 in October of 2017.
The cost of financing a home purchase. This is generally shown as an annual percentage of the outstanding loan.
Generally a requirement for any home mortgage. The premium is usually included with the monthly mortgage payment. Costs and coverage vary by state and the value of the home.
Private Mortgage Insurance (PMI):
Calculated annually as a percentage of your original mortgage amount based on your credit rating and down payment. PMI protects the lender in the event you do not pay your mortgage, and it generally costs 0.5% of your loan each month
The amount you pay each month for your mortgage, homeowner’s insurance, and HOA fees. This payment should be no more than 25% of your monthly take-home pay.
Homeowner’s Association (HOA) Fees:
Fees due in exchange for being part of a homeowner’s association. A homeowner’s association is an organization in a planned community that maintains and reinforces rules for the properties in its jurisdiction
Taxes levied based on the government’s appraisal of your property. These are usually included as part of your monthly mortgage payment. Property taxes vary greatly depending on location and home price. National state averages range from 0.32% to 2.31%
15-Year Fixed-Rate Mortgage
A home loan designed to be paid over a term of 15 years. The interest rate remains the same for the life of the loan.
30-Year Fixed-Rate Mortgage
A home loan designed to be paid over a term of 30 years. The interest rate remains the same for the life of the loan.
5/1 Adjustable-Rate Mortgage (ARM)
A home loan designed to be paid over a term of 30 years. The interest rate does not change for the first five years of the loan.
In conclusion, it is important to always ask yourself one single question before you take the train and buy your dream home. You need to ask yourself if you can afford the home in a very honest and transparent way. Nevertheless, you shouldn’t always think about buying a house as an individual pursuit. You can always explore alternatives like co-buying a house.