How to Calculate your Monthly Mortgage Payment
The most important factor, behind the right fit, is the affordability of a new home purchase. According to guidelines, your mortgage payment should not exceed 25-30 percent of your take home pay. Personally, I would purchase a mortgage for between 20-25 percent of my take home pay. Looking at affordability takes two key ingredients, comparing the price of the home with other key essential components.
Determine how Much You Want to Borrow
The general rule of thumb is about $650 per $100K worth of house. For example, a $400,000 house would cost you approximately $2600 per month, give or take a few, but mainly take – you will probably be paying more! To determine your borrowing amount, subtract the down payment from the purchase price, which will give you the loan amount that is needed. Also, add 3.5 percent of that total price to that number to obtain closing costs. For example, for a $300K home you will need $6,000 in cash to cover lawyers, inspections, title issues and other unexpected occurrences.
Know Your Rates
The next step is to determine the best interest rates for your new purchase. Check with your lender for current rates as they vary often. The interest rate you are given is strongly based on your credit score and history. Knowing your current FICO score and credit rating will give you a great idea of what rates you will qualify for.
Pick the Terms of your Loan
Many factors go into deterring the terms of your loan. If you borrow $250K, your monthly payments will be less on a 30-year mortgage than with a 15-year mortgage. A 15-year mortgage will save you more money in the end, but your monthly payment will be higher.
Consider any Additional Costs
Your total payments will include property taxes, homeowner’s insurance, and possibly PMI – private mortgage insurance. PMI is determined by your down payment. If it is, less than 20 percent be prepared to pay PMI, which can now be written off on your taxes if you make less than a certain amount.
A Comprehensive Report on Facts & Figures
Now you are at the finish line and you have chosen your loan terms and are up to date on the current interest rates. This is the time when you figure out how much your monthly payment to be.
If you need additional help or have any questions about mortgage payments please contact you local Realtor®, mortgage broker and lender.