Using a Mortgage Calculator to Find the Ideal Loan
If you’re looking to purchase a new home, you will find a mortgage calculator to be a great tool. This is a special calculator that is used to help you figure out how much your monthly payments will be. You will also be able to determine how much interest you’ll end up paying over the term of your mortgage loan. When you apply for a mortgage loan, you will need to obtain details that will help you to figure this out, such as the APR (Annual Percentage Rate) and the loan amount. It’s important that you use the mortgage calculator to help you to determine if the loan is something that you can afford for the long-term.
How Much Can You Borrow for Your Mortgage?
When you put in an application for a mortgage loan, you will be asked a series of questions that will help the loan officer to determine which loan programs you’re eligible for and how much you’re able to borrow. A mortgage calculator is usually used during this process. If you want to save yourself embarrassment of getting turned down, you can use the mortgage calculator on your own to find this out. You will be able to know before you go to the bank whether you’re able to afford a mortgage loan. Once you have found the monthly payment for a particular loan, you will need to calculate your monthly household income and expenses to see if it is something that you can afford. Your household income should be two to three times the amount of your mortgage payments.
Low Credit Score Affects on a Mortgage Loan
Your credit score will play a major role in the process of obtaining a mortgage loan. Your income isn’t the only number in the equation used for a mortgage calculator. The mortgage loan originator will look up your credit report and base the information found on whether or not you will be approved. An extremely low credit score will get you disapproved and a mediocre credit score will cause your interest rates to rise, making your monthly payments even higher. Make sure that you know what’s on your credit and what your credit rating is before applying for a mortgage loan. If you find too many items on there with outstanding balances, try to take care of the lower amounts to help clean up your report and raise your rating.
The Importance of a Mortgage’s APR
As you’re looking around for a great mortgage loan, you’re going to have to pay special attention to mortgage annual percentage rates. This is what will determine the monthly cost of your new home. If the APR is too high, your monthly payment will be too high. If your household doesn’t earn enough, you could end up getting turned down, or into a loan that could end in foreclosure. A mortgage calculator will enable you to find out the monthly cost based on the APRs that you are quoted from different lenders.
Fixed Rate vs. Adjustable Rate
You have to be careful that you understand the type of interest rate your mortgage loan will have. As mentioned, the interest rate is an important key to figuring out how much your mortgage will cost and whether or not you’ll be able to afford it. There are two types of interest rate mortgages:
- Adjustable rate mortgages are loans that have interest that fluctuates over the life of mortgage. Most lenders will offer a low initial interest rate, but after that time period ends, the rate can rise. Over the term of the mortgage, you never know what your mortgage payment will be six month to a year from now.
- Fixed-rate mortgages are loans that have a set interest rate. This is the safer of the two options, but usually has a higher rate. This is why most people sign adjustable rate mortgages, since they come with low initial rates. But this can quickly turn ugly if the economy hits a bump and interest rates soar. Fixed rate mortgages are ideal for people who want to know exactly what their mortgage payments will be for the life of the loan.
When applying for a mortgage, make sure to ask whether the loan has an adjustable rate or fixed rate. You will need this information for your mortgage calculator. Once you have all of the necessary information about the loan and your personal finances, you will be able to use the calculator to help you determine if it is the right mortgage for you and your family. You can obtain loans online or by visiting a local lender.