# How a Mortgage Calculator Can Save Your Expenses

Mortgage Calculator: Before you go ahead to buy a house, you should use a mortgage calculator to check how much your home will cost per month and how much you’ll pay in total interest. This is an important step in cross-examining whether you can truly afford your would-be home.

Using a loan calculator is simple. You’ll just have to enter your home’s value, the down payment you’re making on the property, and the interest rate.

The calculator will show you the amount that you’d have to pay for your home so you can decide if it fits into your budget and if you have enough money for it.

### Mortgage Types

#### – 15-Year Fixed-Rate Mortgage

This is a home loan designed to be paid over a period of 15 years. The interest rate remains the same for the entire period of the loan.

A 15-year mortgage has a higher monthly payment but a lower interest rate than a 30-year mortgage. Because you will have to pay more toward the principal amount each month, you’ll build equity in your home faster, be out of debt sooner, and also save thousands of dollars in interest payments.

#### – 30-Year Fixed-Rate Mortgage

This home loan is designed to be paid over a term of 30 years. The interest rate here also remains the same for the period of the loan.

A 30-year mortgage will have the lowest monthly payment amount but it usually carries the highest interest rate—which means you’ll have to pay much more over the duration of the loan.

If you do not really like the idea of paying thousands of dollars more for your home than you have to and staying in debt twice as long as you need to, then opt for a 15-year mortgage if you’re not paying cash for your home.

#### – 5/1 Adjustable-Rate Mortgage (ARM)

A home loan arranged to be paid over a term of 30 years. The interest rate will not be different for the first five years of the loan. After that period, however, it will adjust yearly based on market trends until you have paid off the loan.

The interest rates usually are comparable to a 30-year mortgage, but ARMs will transfer the risk of rising interest rates to you—the homeowner. Presently, interest rates are incredibly low, and they have been for some time. But once rates start to adjust, there’s a 50% possibility that they will go up!

## How a Mortgage Calculator Works

Buying a home is mostly people’s highest goal and life’s largest financial transaction, and how you finance it shouldn’t be a snap decision.

Setting a budget upfront far before you look at homes will help you avoid desiring to have a home you can’t afford. That is where a simple mortgage calculator can help.

A mortgage payment includes these four components called PITI: principal, interest, taxes and insurance. Many homebuyers know about these costs but they are not prepared for the hidden costs of homeownership.

These include homeowners association fees, private mortgage insurance, routine maintenance, larger utility bills and the major repairs.

Mortgage loan calculator has the capacity to help you factor in PITI and HOA fees. You can also adjust your loan and down payment amounts, interest rate and loan term to see how much your payments might change.

It is important to know that your specific interest rate will be dependent on your overall credit profile and debt-to-income, or DTI, ratio (the sum of all of your debts and new mortgage payment which is divided by your gross monthly income). The riskier the borrower, the higher the interest rate in most circumstances.

### What’s the Necessary Credit Score to Get a Mortgage?

More than making sure you can afford your mortgage payments, lenders also look at your credit score when deciding both whether to lend to you and the amount of interest to charge you for borrowing.

When lenders look at your credit score, most of them usually have a minimum score requirement before you can even get approved for a mortgage loan. This minimum credit score is always lower with government-backed loans, including FHA loans, VA loans, and USDA loans than it is for conventional mortgage loans.

For a loan backed by the FHA, you will need a credit score of 580, although it is possible to get a loan with a score as low as 500 under some circumstances if you make a larger down payment.

VA lenders typically demands a score between 580 to 620, depending on the lender, while USDA loans typically won’t be available to you if your score is less than 640.

On the other hand, conventional loans generally require a minimum credit score of 620—but you will have to pay much higher rates and could be stuck with a subprime mortgage if your score is low. To get the most competitive rates on a mortgage, a score of 740 or higher is most preferred.

### How Do I Get Prequalified for a Mortgage Loan?

If you’re planning on applying for a mortgage loan, it is a great idea to try to find out in advance what kind of mortgage loan you will qualify for. There are two ways to find out that.

#### Mortgage Loan.

• You could get pre-qualified, which means providing some basic financial information about your income and debt to find out what kind of loan you can stand a chance of getting. Pre-qualification means you’re likely going to to get approved for a loan as long as the information you provided was accurate, but it’s not a definite approval.
• You could get pre-approved, which involves providing more financial information including your bank statements and tax returns. When you get pre-approved, you’re told specifically how much you will be allowed to borrow and what the terms of your loan would be. You will generally be approved with those terms as long as nothing changes and sometimes, you can even lock in your rate for some time so that you are guaranteed to get the specific loan terms you were pre-approved for.

### How Can I Pay Off My Mortgage Early?

Sending in some extra payments is the best way to pay off your mortgage early, and an easy way to do that is to twist your pattern of paying your mortgage.

If you get paid once every two weeks—for a total of 26 payments a year instead of 24—you can pay half of your mortgage payment with each paycheck instead of just sending in one mortgage payment per month.

If you follow this pattern, you’ll end up making an extra full payment each year since you’ll receive three paychecks in two months out of the year.

Paying two times in a month makes it easy to adjust to sending in a little extra cash since the same payment amount is usually taken out of every single paycheck.

All the same, not all lenders accept bi-weekly payment. So you can just transfer the money every payday to a savings account and then make your mortgage payments out of that account once per month.

In Conclusion, it is really advisable to calculate how much you will have to spend on getting a property. This will help you know how much to save up in preparation.

You shouldn’t have an interest in a home you cannot afford to buy.  Using a mortgage calculator helps you to understand what kind of loan you are eligible for.