Are you thinking about buying your first home? Determining your budget and how much house you can afford is one of the most important first steps.
This is where using an online mortgage calculator comes in handy.
For example, this Denver mortgage calculator allows you to estimate your monthly mortgage payment by inputting details like home price, down payment amount, interest rate and loan terms.
Read on to learn why you need to be using a mortgage calculator when figuring out home affordability.
Know What Payment Fits Your Budget
When you start seriously looking at homes to purchase, you’ll likely browse listings that catch your eye in various price ranges.
An online mortgage calculator is the easiest way to get estimates on what different home prices will mean for your budget.
You can adjust the home price, down payment and other factors to see estimated monthly payments, helping you stay within a comfortable range.
Don’t make the mistake of falling in love with a home without first determining if you can realistically manage the mortgage payment. A mortgage calculator gives you crucial insight, so you shop smart.
Understand the Impact of Down Payment Size
Saving up enough for a down payment is often one of the biggest challenges for first-time home buyers. When you use an online mortgage calculator, you can clearly see how tweaking your down payment amount affects your monthly payment.
For example, you may find increasing your down payment from 5% to 10% makes your monthly payment much more affordable.
Or you might determine that you can manage higher monthly payments to reduce your down payment requirement. Having a clear view of how down payment size impacts affordability helps guide your saving strategy.
See How Interest Rates Impact Cost
Mortgage interest rates fluctuate often, impacted by factors like Federal Reserve policy and the overall economy. When rates are low, you may assume you can afford more expensive homes than you could when rates are high.
But without actually calculating payments at different rates, your perception may be off. Interest rates directly impact your monthly payment and long-term costs.
As you research current rates and receive mortgage quotes, use a mortgage calculator adjusted to those exact rates. You’ll likely want to do calculations at the highest rates you expect in order to future-proof your budget.
Compare Loan Terms and Types
Standard 30-year and 15-year fixed-rate mortgages are the most common loans for home buyers, but your mortgage calculator can also help compare adjustable-rate mortgages, FHA, VA, USDA and jumbo loans.
As you consider different mortgage programs and options for terms like 10, 20 or 30 years, you can determine how each affects your budget both short and long term.
Often, the longer the term, the lower and more affordable the monthly payments will be. But that comes at the expense of paying significantly more interest over the full loan repayment period. Know your total costs.
Buying a home is not only one of the largest purchases you may ever make, but also a complex financial decision. Using an online mortgage calculator removes guesswork by allowing you to easily compare personalized scenarios.
As a home buyer, that insight is invaluable for both assessing home affordability today and setting yourself up for mortgage success into the future.
