What do you want of Home Finance Calculator?.
In my last report I explored some of the secrets to accurately calculating your wage for use with online mortgage calculators. Specifically we discussed the "how much loan do I qualify for" mortgage calculator.
Just a quick and simple recap: we discussed that self employment net income, commission, overtime and bonuses will be averaged over a 24 month duration unless it is declining in which case the most new 12 months will be taken into consideration or the overtime and bonus may not be considered at all. In the case of bonus and overtime wage especially, your owner will need to verify that the continuance of the extra wage is likely. Base employment income, be it wage or hourly over a accepted workweek (usually 40 hours but less for professions like nursing) will be taken into consideration without an average. Thus raises are taken into consideration immediately and without averaging in past wage at lower hourly or wage rates.
Home Finance Calculator
When trying to conclude how much loan you qualify for it is foremost to be sure you have some general target of house and price you would like to buy. This is so you can have a set of reasonably correct figures for asset tax, homeowners assurance and mortgage assurance which are all part of the total housing payment that will be compared to your monthly wage and measured as a percentage.
Since the number of mortgage you qualify for is a by goods of the total payment your wage can sustain (lets say 33% of your pre-tax income), the higher the total of items like taxes and assurance the less room there is for monthly principal and interest payments and thus the lower the number of loan you can expect to be approved for.
So let's approach this calculation by steps.
Step 1: You probably have a single type of house or price range in mind. Let's start there. If you think that the home that would suit your needs will be about 0,000 we will base our calculations on that and adjust as necessary.
Step 2: We need to presume the approximate every year asset tax rate. This form will vary not only by region but also within regions. In California we can start with a general base rate of 1.25% annually. By taking 1.25% multiplied by the target sales price of 0,000 and divided by 12 months we arrive at a asset tax form 0.42 we can use in our first calculation.
Step 2: Homeowners assurance is a requirement by lenders and can vary by coverage, providers, regions and particulars of the home and surrounding area. I regularly assessment using a ration of value and a conservative ration to use for a base course (no flood no earthquake) would be 0.40% of the purchase price per year or about a month in this case. (0.40% x 250,000 = ,000 / 12 months .00).
Step 3: conclude how much cash you can or want to put as a down payment. In this scenario we will assume you are a first time home buyer and putting down 3.5% and plan to use an Fha mortgage for your purchase. If you are seeing at putting less than 20% down under any agenda you will pay some sort of mortgage insurance. Mortgage assurance is paid by you but is to safe the lender against loss should you not make payments on the home. Fha mortgage assurance is calculated as 0.90% annually of the base loan amount. If the purchase price is 0,000 and the down payment is 3.5% (50.00) then the base loan number will be the difference 1,250 and the monthly mortgage assurance will be 1,250 x 0.90 = ,171.25 / 12 months or 0.94 monthly. If the loan you are seeking is a accepted loan, then the mortgage assurance rate can vary by prestige score and down payment and region. You can visit a site like Radian.biz. Choose Bpmi -- non refundable in their rate finder and fill in the remaining blanks. The rate finder will give you a monthly mortgage assurance estimate.
Step 4: If the asset is a co op or a condo/town house or a Planned Unit Development, a home owners fee will likely apply and must be included in your over all housing payment for qualifying purposes. Home owners connection can have benefits but they do take away some borrowing capacity.
Step 5: presume the number of monthly payment you likely will be approved for. In most cases using 33% of your gross wage is a safe bet although some programs will go higher with strong compensating factors. Let's stick with the 33% here. Assuming in this case that your pre tax household wage is ,000.00 then the housing payment you would qualify for is 33% x ,000 or 80.00.
Step 6: Pull the asset tax and assurance and home owners connection figures from this total housing payment number.
So using our example:
Total payment -- 80.00
Prop Taxes 0.42
Home assurance $ 83.00
Mortgage assurance 0.94 (assuming Fha)
Homeowners Assoc 0.00
Total Left Over
For Mortgage payment 05.64
You can now enter some basic data in the online mortgage calculator and reach an approximate conclusion on how much loan you qualify for.
Step 7: Enter the current interest rate (lets assume 5.5%) and the loan term (assume 30 years) and the number of housing payment left over after taxes and assurance into the online mortgage calculator (,305.64). The mortgage calculator figures that the loan number you qualify for is 9,952. If the interest rate is lower the loan number superior for will be higher and vice versa. You can take this form and add your available down payment funds to arrive at an approximate housing price you should be targeting but remember as you play with the calculator and adjust the sales price, all of your figures will convert as a consequent so you can refer back to the steps to double check your results.
For more facts or comments on this report please email hugh@themortgagecity.com.
Using an Online Mortgage Calculator - asset Tax, insurance and Homeowners relationship Fees
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