Online Mortgage Calculator

Before you make the commitment to home ownership you need to know, ‘How big of a mortgage can I afford?’ You have to consider that the monthly mortgage payment is only a portion of the expenses associated with purchasing and maintaining a home. You will have a down payment, closing costs, and escrow charges as a minimum. Make a budget by reviewing the last 12 months of your expenditures. Are there areas that you can cut down on? If so, trim your expenses and put the money toward making a larger down payment. If you do not meet the down payment requirements of the lender you will have to carry mortgage insurance.

Mortgage insurance is insurance that the lender requires a borrower to carry that will pay the loss on the mortgage if the home owner defaults on the loan. The lender will foreclose the home, sell the home, and bill the insurance company for the balance remaining to be paid on the mortgage. This will add from $50 or more to the monthly mortgage payment you make to the lender until you have 20% or more equity in the home.

Step 1: Start research the online listings, the newspaper advertisements, and just drive around to find the home that you want to buy. Look at all the prices and compare to find the best house you can for the least amount of investment. Multiply the asking price by .80 and you will have an estimate of the mortgage payment. Remember this is only a best guess estimate, assuming a 20% down payment, and other standard costs.

Step 2: You can go online to eHow to Estimate your Mortgage Payment and enter the requested data. You will get a quick estimate of the monthly mortgage rate for each of the homes you are considering.

Step 3: The quick estimates you are making are for the principal and interest payments only. You must add the other charges that will be included in your monthly mortgage allocation. You will have to pay a prorated amount toward your annual tax liability, your property hazard insurance, and PMI. This will be held in an escrow account by the lender, who will then pay the annual premiums on each of these items.

Step 4: You have now figured the monthly mortgage payment, but you will have other costs associated with home ownership. You will have monthly utility payments, maintenance fees, repair costs, and landscaping upkeep. If you live in an area that has a home owner’s association you may have fees to pay to this association. The maintenance fees can be estimated at around 1% of the cost of the home. For example: You purchase a home for $150,000. $150,000 x .01 = $1,500. Divide the $1,500 by 12 to get your monthly estimate for home maintenance. $1,500/12 = $125.00 per month for estimated maintenance.

Step 5: You will have a cost for furnishings and appliances. You will have to include repair and replacement costs of these items in your monthly budget for these items. Look at your monthly income and see if you can afford these added expenses. Multiply your income by 40% (.40). Compare the answer to the estimated monthly fees associated with the home that you want to buy. If your figure is greater than the associated costs, then you can afford the home of your dreams.

If the figure you come up with is less than the monthly expenses for the home, you will need to find a home that is less expensive. You may need to save money longer to make a larger down payment. You may need to find a way to supplement your income or wait until you have been employed long enough to earn an increase in wages. ‘How big of a mortgage can I afford?’ can be answered with just a few simple calculations following the above listed steps.