Are you about to buy a home? Then, before you start your search for a mortgage lender, who will approve your loan application, you would like to use a mortgage calculator. It is because the calculator will help you answer a number of crucial questions. From how much home you can afford to save money on a refinance, a calculator offers the data you require to make critical financial decisions.
You can go online and use a mortgage calculator Houston that can meet your needs. However, you should be careful while using a calculator. Here are some traps that you should avoid.
- Mortgage payment
Generally, a mortgage payment combines five different expenses. Of course, it includes the principal, as well as interest payments. Along with these, various mortgage servicing companies collect for insurance, private mortgage insurance, and real estate taxes. A mortgage calculator must factor in all of these potential payments.
- HOA fees
One thing that you should always try to avoid is purchasing a rental property, which comes with the Homeowner’s Association Fees. HOA fees eat into a major cash flow of the property, especially in the early years of a leveraged property. But in case, you are a homeowner, some of the better communities come with HOA fees, like it or not. The key is to ensure you factor in these fees while making a buying decision. There are some calculators that don’t include these fees, but the customized ones do so. Generally, HOA fees range from $200 to $400 per month, but it can go higher in expensive areas of the country.
- Interest rates
For any mortgage calculator to work properly, you need to enter the interest rate on the loan. In case you have just started your search for a loan, you are more likely not to know the interest rate on your eventual mortgage. These rates are affected by several factors, including the amount of your down payment, the FICO credit score, your income, your debts, the cost and location of the home, as well as the type of mortgage. Getting the right interest rate is critical with a mortgage calculator. Even a minimal difference in the rate can make a big impact on both the monthly payment and the total amount of interest that you will pay over the life of the loan.
Mortgage interest rates on most of the owner-occupied houses are deductible for the ones who itemize their deductions. The deduction can lower the effective interest rate on the mortgage. For instance, a four percent interest rate translates into an effective rate of 3% for those paying 25% in taxes at the margin. Besides, real estate taxes are also deductible. Based on your marginal tax rates, tax savings can be considerable. Most of the mortgage calculators often ignored the taxes.
Using a mortgage calculator can be a great way to start your home buying process. But you should keep this in mind that they are only good when you provide accurate data to them. To get a complete picture, consider all of the factors mentioned above and generate an accurate estimate.
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.