Recent research shows that first-time home buyers account for roughly 45% of all home buyers nationwide. If you’re just starting your home-buying journey, it can be challenging to know where to begin without assistance. Before you can hit the ground running, you must clearly understand what you’re looking for and – perhaps more importantly – what you can afford.
Your purchase options depend upon critical factors like your household income and credit score, as well as current interest rates and market conditions. Each of these factors can significantly impact your home-buying process, so it’s essential to give them all adequate consideration. One resource available to prospective home buyers looking to gain a clearer picture of their purchasing power is an online tool known as a “mortgage loan calculator.”
What is a Mortgage Loan Calculator?
A mortgage loan calculator is an easy-to-use online tool that uses a few data points to help home buyers estimate the cost of their monthly mortgage payments. Some of these data points include:
- Home value
- Down payment amount
- Loan amount
- Interest rate
- Loan term
Some mortgage calculators can also help buyers estimate their overall purchase budget based on their income, credit score, and outstanding debt. These calculations can prove extremely valuable when it comes time to determine your ideal real-estate price point and mortgage loan amount.
How Does it Work?
Let’s take a look at some examples of mortgage loan calculations:
Monthly Payment
Home Value: $400,000
Down Payment (20%): $80,000
Loan Amount: $320,000
Interest Rate: 6.75%
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Monthly Payment (Principal + Interest) = $2,076
Remember that in addition to your monthly principal and interest payments, you must also pay applicable insurance fees and property taxes. If you’re looking to gain the clearest possible picture of the monthly cost of home ownership, it’s advisable to utilize a calculator that factors in all fees, taxes, and other variables.
Purchase Budget
Yearly Household Income (before taxes): $100,000
Monthly Debts (car payment, student loans, etc.): $1500
Down Payment: $75,000
Loan Term: 30-year fixed
Credit Score: 700-719
Interest Rate: 7.013%
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Purchase Budget: $250,000
Based upon this calculation, a household in this financial position should look at homes with a purchase price of around $250,000 and a mortgage amount of about $175,000. However, it’s essential to understand that these calculations can vary significantly due to the fact that interest rates vary depending on the current market conditions in your location, so make sure to tailor your calculations to your specific situation.
Who Benefits from a Mortgage Loan Calculator?
As we’ve discussed, first-time home buyers often benefit from using a mortgage loan calculator because it helps them establish an appropriate price point and determine how much of a loan they may qualify for. These first-time buyers, however, are not the only beneficiaries of this resource.
- Credit-challenged buyers: Prospective buyers with lower credit scores can utilize a mortgage loan calculator to determine the potential impact of their credit on their purchase budget and monthly payments. Average estimates of mortgage payments do not necessarily reflect reality for individuals with poor credit or no credit at all. Estimating your actual costs upfront with an accurate mortgage calculator can help you to avoid potential surprises down the line.
- Renters: Those who currently rent their homes can use a mortgage calculator to determine whether they would benefit financially from transitioning to home ownership. Some renters may be surprised to learn that their monthly mortgage payment would be lower than their current monthly rent. A mortgage calculator can help these individuals estimate the potential savings of purchasing a home rather than continuing to rent.
Take the First Step with Loan X Mortgage
Whether you’re a first-time home buyer or a seasoned veteran of the real estate industry, Loan X Mortgage offers competitive pricing and modern solutions to support clients of all backgrounds. If you’re looking to purchase a home and wish to estimate monthly payments, Loan X Mortgage offers an easy-to-use online mortgage calculator that accounts for a myriad of financial factors, including HOA fees, insurance costs, and property taxes.
Loan X Mortgage knows that buying a home can be overwhelming. That’s why we pride ourselves on providing clients with unparalleled support and unwavering transparency throughout each step of the mortgage lending process. With over 150 team members working in 5 different states, Loan X has the industry know-how necessary to help clients breathe a little easier while navigating major financial decisions.
Whether you’re looking to purchase a new home, refinance your current home or take out a home equity loan, Loan X Mortgage can help you find a loan that’s right for you. Reach out today to let us know what you’re looking for in a mortgage lender, and visit the site to crunch your numbers with our mortgage calculator.
