It all starts here. Unlike buying a car when you first find your car and then obtain financing, when buying a home you obtain financing and then find your home.
When determining your estimated monthly payment, it's important to include not only the principle and interest, but also property taxes and insurance. This is commonly referred to as PITI (Principle, Interest, Taxes, and Insurance). Of even greater importance is to discuss your lending needs with your lender. Contact us today and we'll be happy to provide you with lender recommendations!
To estimate your PITI, simply follow these instructions:
- Principle: Enter the purchase price of the home.
- Interest: Enter the current interest rate corresponding to the type of loan you're pursuing. Average mortgage rates* for the first quarter of 2018 are:
- FHA: 4.0%
- VA: 4.0%
- Conventional 30-Year: 4.25%
- Conventional 15-Year: 4.125%
- Term: Enter the length of your loan in years. (Most loans are either 15 or 30 years.)
- Down: Enter the amount of your down payment. Down payments* are:
- FHA: 3.5% minimum
- V A: 0% minimum
- Conventional: 3% minimum
- Taxes: The amount of property taxes you'll pay based on the purchase price of the property. This field auto-populates.
- Insurance: Besides being a good idea, lenders require you to purchase homeowner's insurance. This is typically included in your monthly payment and is deposited into a special account by your lender. This field auto-populates.
- PMI: Private Mortgage Insurance (PMI) is charged to you by your lender to insure your loan. (Mortgage Insurance and Mortgage Insurance Premium, abbreviated MI and MIP, respectively, pertain to FHA loans. ) Insurance is required on any loan when your loan-to-value (LTV) is greater than 80%. It's important to realize that insurance remains for the term of the loan for FHA, whereas it is removed for conventional loans once 80% LTV is realized. Although accurately calculating PMI is a little more involved, you can estimate PMI by multiplying your loan amount by 0.05% (0.0005). For FHA loans, use 0.07% (0.0007).
- Extra: It's amazing what paying a little extra each month toward your principle does to your mortgage! Although your monthly payment increases by the amount of the extra payment, the total amount paid, including interest, to the lender at the end of the loan is dramatically less. To see the savings, click the Mortgage Calculator's left or right slider until the loan total is displayed. Once displayed, enter your extra payment amount and click the calculate button.
As stated, your monthly payment calculated above is an estimate and should only be used to get a general idea of what your monthly payment will be. Again, it's important is to discuss your lending needs with your lender. Give me a call or send me an email and I'll be happy to provide you with lender recommendations.
* Many factors affect rates and down payments. Contact your lender to discuss your rate and down payment.