How To Use A Mortgage Calculator

Are you thinking of becoming a homeowner for the first time but unsure of the type of property you can afford? If that’s the case, a mortgage calculator is a useful tool you may use to estimate your potential monthly mortgage payments.

You can estimate your monthly payments with the use of a mortgage calculator. When you utilize the Rocket Mortgage® calculator, it will take into account expenses that are typically forgotten, such as homeowners insurance and property taxes.

Learn more about the various variables a mortgage calculator considers when calculating your monthly mortgage payments.

Mortgage Calculator Considerations
If you’re a first-time homeowner, you might not be aware that there are other factors to take into account when figuring out how to calculate a mortgage payment in addition to the loan amount. Let’s examine the breakdown of your monthly mortgage costs provided by mortgage payment calculators.

Home Value
In all likelihood, your house price will be either greater or cheaper than the listing price you initially saw on a real estate website, even if it may wind up being the same. It represents the entire sum you have agreed to pay for your house and is the final price you have negotiated with the seller.

The cost of the home is also the element that is most easily modifiable while looking for a mortgage. For instance, you are unable to bargain for a cheaper price on your state’s property taxes, but you can always attempt.

Your anticipated monthly mortgage payments could fluctuate significantly based on how much you modify the home price in the mortgage calculator. You can fiddle around with those numbers to determine the monthly payment you can manage.

Determine the size of the house you can afford.
Use the Home Affordability Calculator on our website.

View My Affordable Down Payment Options
To qualify for a conventional mortgage, most lenders require a down payment. A down payment is a portion of the total loan amount that you pay upfront before the mortgage is closed. The minimum down payment required by lenders for a traditional loan is 20% to avoid paying private mortgage insurance (PMI). Lenders will require you to include PMI in your monthly mortgage payment if your down payment is less than 20%.

Therefore, if you’re buying a $300,000 house, you’ll need to put down $60,000 before the loan closes. The amount you borrow is reduced by the down payment you make.

Of course, many people lack the financial means to make a 20% down payment. Thankfully, you can still obtain a traditional loan with as little as a 3% down payment.

Accordingly, utilizing the aforementioned example, your down payment will now be $9,000 rather than the $60,000 originally required. If you are eligible for a USDA or VA loan, you may even be able to obtain a mortgage with no down payment. USDA loans are not available from Rocket Mortgage.

But there are benefits to putting down a bigger sum of money. If you put more money down, your mortgage lender might give you a better interest rate. This is because you are less likely to default on your loan if you put down a bigger amount.

Using the Rocket Mortgage calculator, you may determine your down payment as a percentage or a set dollar amount. Try both to better understand the long-term effects on your home costs and the kind of down payment you’ll need to bring to closing.

Loan Period
The length of your mortgage is known as the loan term. Take a 30-year mortgage, for instance, and you’ll be making payments every month for 30 years. Your mortgage should be repaid after the loan period is through.

Although the length of a mortgage loan can vary, most borrowers choose a fixed-rate 15- or 30-year mortgage. By altering the loan terms, you can change your mortgage payment every month.

For instance, you should select a 30-year loan period if you desire a smaller monthly payment. A shorter loan period is preferable if you wish to pay less interest overall and can make a greater monthly payment.

Consider carefully how much you can afford to put toward your monthly mortgage payments. You can then experiment with several loan terms to determine which one is best manageable for your present income.

Find out how much each choice will cost you to pay each month by using the mortgage calculator. Then, take into account the total amount of interest you will pay for the loan.

Inflation Rate
Your lender will charge you interest on the entire amount you borrow in return for providing you with a loan. This interest is calculated by lenders as a percentage. A 4% interest rate, for instance, means that you will pay 4% of the entire loan amount until the mortgage is paid off.

A portion of your monthly mortgage payment will go toward interest, and the remaining amount will be put into the debt. The majority of your initial monthly payments will be used to pay interest. But over time, a growing portion of your funds will be allocated to the principal.

Amortization is the process of distributing your interest and principal payments over time. Your loan balance will be zero once the entire amortization period has passed. Unless you pay more, this normally occurs after your contract.

A ZIP code
The cost of homeowner’s insurance varies according to your residence’s age and condition. For instance, if your home is older or hasn’t been properly maintained, you can have to pay a higher premium. You must enter your zip code when using a mortgage loan calculator to get an accurate estimate.

Additionally, you’ll be required to pay property taxes to your local government for nearby public services like emergency services, libraries, and schools. Property taxes can vary greatly based on where you reside, just like homeowners insurance. You might be able to use an escrow account to pay your property taxes. The Rocket Mortgage calculator considers those taxes when giving you an estimated monthly mortgage payment.

Residence Insurance
Homeowners insurance protects your property in the event of a break-in or natural disaster. It’s not a legal requirement, but your lender will likely require you to maintain a certain amount of insurance to fulfill the terms of your loan.

This insurance protects both you and your lender from financial loss. It provides defense against the following events:

Damage to your home from a natural disaster or accident
deterioration of other buildings on your property
Theft of personal property due to a break-in
If someone is injured on your property and sues you for liability damages
Annual homeowners insurance premiums vary by state. Some other factors that influence how much you’ll pay include:

Your credit rating.
The age and current condition of your home
How much personal property do you have to protect
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What Does A Mortgage Payment Include?
A typical monthly mortgage payment has four parts to it: principal, interest, taxes, and insurance.

If you only consider the price of your home, you’re missing out on a big part of the financial picture. When you figure out your total monthly household income, be sure to consider any recurring debt and expenses.

From there, you can come up with a sample monthly budget and get an idea of how much money you can put toward your mortgage. This will give you a rough estimate of how much home you can afford so you can narrow your search.

A mortgage calculator can help you get a realistic idea of the type of home you can afford. The Rocket Mortgage calculator estimate shows principal and interest and has the option to include estimated property tax and homeowners insurance costs, based on your zip code.

Using a mortgage calculator will give you a rough estimate of what you can expect to pay for homes in different locations at different price points. However, your exact rates may vary when you apply for a mortgage loan.

Want a more exact idea of how much home you can afford? Getting approved for a loan with Rocket Mortgage tells you exactly how much of a loan you can qualify for. During the preapproval process, the team of Home Loan Experts at Rocket Mortgage will verify your income and assets to give you the most accurate idea of how much you can expect to pay each month, plus the interest rate you’ll qualify for. Getting pre-approved is quick and easy – you can even apply online from the comfort of your home.