Why use a Mortgage Calculator Before Buying a Home?
Are you dreaming of buying a home and don't know where to begin? Do you know what you can afford? You don't have to endure the embarrassment of being turned down at the bank. Try a mortgage calculator first.
Mortgage calculators are great tools for helping you assess your financial situation before you apply for a mortgage. An online search will yield a plethora choices ranging from simple to complicated with graphs and amortization schedules. You input the loan amount, interest rate and term and it calculates, not only your monthly payment, but also interest paid over the life of the loan and the payoff date.
Some calculators will display a more detailed picture by allowing the input of property tax and insurance. Others will compare fixed-rate versus ARM, monthly payments versus bi-weekly (this method could save thousands on interest) or one extra lump sum payment.
To compliment mortgage calculators, there are also borrowing power and debt to income ratio calculators. These calculators allow you to gauge your credit worthiness and can estimate the amount you can borrow, before you go to the bank. Your borrowing power is calculated based on your income and debts. The calculators have fields for income, dependants, car payment, credit limit and other payment obligations, such as child support or back taxes. Debt to income ratios are calculated by dividing your payments by your total income. The lower the percentage the better.
So, why use a mortgage calculator before buying a home? Because knowledge is power and many potential homebuyers don't know enough about this process. It's most likely the biggest purchase you'll ever make. Mortgage calculators are easy to find and use. You can use that information to set goals, get your finances in order and perhaps save money in the long run.
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