CALCULATING YOUR MONTHLY MORTGAGE PAYMENTS

Calculating Your Monthly Mortgage Payments

One of the most important factors to consider when buying a new home is affordability.  As a general rule, mortgage payments should not exceed 25-30 percent of your monthly take-home pay.  The best way to know what you can afford is to determine the possible payment range by comparing the price of the home with other essential ingredients.

Figure Out How Much You Want To Borrow

Your first step to calculating your monthly mortgage payment is knowing how much you want to borrow.  This can be determined by subtracting your down payment amount from the purchase price of the home, which will give you the amount that you will need to request from a lender.

Know Your Rates

The next step is to determine the current interest rates for the purchase of a home.  Rates vary and may change often, so check with your lender for current rates.  It's worth noting that the interest rates you receive will, in part, be based on your credit history.  This means that knowing your FICO score and credit rating will give you a good idea as to how your interest rates will be calculated.

Choose Your Loan Term

Your monthly mortgage payments will be determined by a number of factors, including the term of your loan.  If you were to borrow $250,000, your monthly payments would be less with a 30-year mortgage than with a 15-year mortgage.  The reason is because it would take larger monthly payments to get the loan paid off quicker, which is why you will need to select a loan term before calculating your payments.

Additional Costs To Consider

Your total mortgage payment will include taxes, homeowner's insurance and possibly even private mortgage insurance (PMI) if you provide less than 20 percent down and your loan requires it.

Just The Facts & Figures

Now that you know how much you need to borrow, have chosen your loan term and are familiar with the current interest rates, it's time to calculate your payment.  Most lenders offer a mortgage calculator on their Web site or you can get an estimate by speaking with your lender.

If you still need help in calculating your potential monthly mortgage payments, don't hesitate to ask me, or contact your mortgage broker or lender.

      Enrique Escobar

Houston Realtor