Mortgage Calculators Help Prepare You for Finding the Best Loan

When credit is tight, even a savvy buyer may need to review some tips for determining how much house to buy and how to best qualify for a mortgage.  Home mortgage loan affordability and prequalification calculators deliver data for negotiating and choosing a loan. 

Fortunately, once you gather some information on your finances, a home affordability mortgage calculator can prove to be very useful in helping you determine how much home you really can comfortably afford.  This analysis should take place before you start shopping for the best mortgage rates.

Mortgage Calculations Start with Total Home Expenses

The amount that you can afford to pay for a house each month includes more than the mortgage payment. Add in these expenses:

  • Property taxes
  • Insurance
  • Utilities
  • Other monthly expenses for maintaining a home

Build in a cushion for emergency expenses, too. Think of other home expenses that might arise in the next several years. Realistic planning will help you avoid taking on more than you can afford.

To find the best mortgage rate, take steps to build the highest credit score that you can. Review your credit report to ensure its accuracy and resolve any problems that you find.

If your credit report includes missed payments because of an illness or other special situation, explain these to the lender. By showing that your report is generally favorable, the lender might agree that you will be able to make your loan payments consistently. Taking the time to prepare and negotiate could earn you a lower interest rate and save thousands of dollars over the years.

Prequalification Calculator Reduces the Guesswork

With a prequalification calculator, you enter a few data elements, and the calculator analyzes your income, assets, and the mortgage interest rates available to you. It then estimates the amount that you can afford to borrow. Thus you can evaluate yourself in a way similar to a loan officer's review. While this estimate provides no guarantee, it can help guide you in shopping for the best mortgage rate.

The calculator prompts you to enter:

  • Your monthly household income before taxes and deductions;
  • The monthly total of your payments for credit cards; auto, personal and education loans; and any other installment payments or recurring obligations;
  • The percentage rate of your local property taxes (not the dollar amount);
  • The estimated mortgage interest rate, stated as an annual percentage rate;
  • The amount of cash that you have available for the down payment and closing costs;
  • The number of years allowed for you to repay the mortgage loan.

Besides showing the maximum amount for which you prequalify, the calculator tallies the amount for the down payment and closing costs and the total cash contribution for these. Knowing these costs when you start talking with lenders will strengthen your position for negotiating the best mortgage loan.

Posted By :
Dean Schermerhorn, MA, owner of Concise Communications, lives in Reno, Nevada. He has written for banking, health-care and manufacturing businesses and articles on finance and business topics.

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