Use A Mortgage Rate Calculator to Calculate Your Down Payment & Qualify for a Mortgage Loan

By Karen Lawson
Calculators for Mortgages Columnist

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Using online mortgage calculator tools can help you determine your readiness to buy a home. An affordability calculator can help you determine how much you can afford to spend for a home with a comfortable monthly mortgage payment. You can also use a prequalify calculator to see how lenders review income and debt information, and learn how much you can save by selecting a mortgage loan with a shorter repayment term.

Affordability and Your Down Payment

Although it's possible to buy a home with a low down payment, lenders typically provide borrowers with larger down payments with lower interest rates and    lender costs. Here are some more benefits of making a larger down payment:

 
• Increase buying power: Your down payment amount and your    mortgage amount determine how much you can afford to pay for a home.
 
• Access to more financing options: If you can make a larger    down payment, lenders may offer a larger choice of mortgage loans. This can be helpful if you want special loan terms including interest-only payments, jumbo loan amounts, or other mortgage options involving additional risk to the lender.
 
• Establishing immediate home equity: Home equity is defined    as the difference between what a home is currently worth less any mortgage    loans against it. Making a larger down payment establishes immediate home    equity. In volatile real estate markets, homeowners with little home equity    risk owing more than their homes are worth.
 
• Potential access to home equity financing: Homeowners    with enough home equity may qualify for a home equity line of credit (HELOC).    This type of loan is useful for home improvement projects, repaying debt,    and can provide an emergency source of cash. Lenders can't offer HELOCs to    homeowners with little or no home equity.

First time home buyers who don't have a large down payment may qualify for  down payment assistance through community home buyer programs and other resources.  Check with real estate professionals or mortgage lenders to learn more about  down payment assistance programs available in your area. These programs typically  provide funds for making a down payment, in exchange for a "silent" second  mortgage which does not have to be repaid until you sell your home or move  out.

 When seeking down payment assistance programs, be careful of offers that require  immediate repayment of a second mortgage. This leads to more mortgage debt  and less home equity Determining affordability is a first step toward finding  and buying a home and mortgage financing that won't cause problems later on.  Mortgage calculator tools can help you decide if you need more time for saving  a down payment or paying down debt before shopping for a home and mortgage  loan.

Source:
Fannie Mae Homepath Homebuyers Oct 08, 2008



About the Author
Karen Lawson is a freelance writer with extensive background in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.