A mortgage is a long-term debt that is secured by property. It’s used to purchase a home, and over time you’ll repay both the loan amount and interest charges on it.
There are a few things you need to know about mortgages, so that you can make the right choice and ensure that your home loan is affordable for you over its term. To help you get started, Bankrate has a calculator that will help you calculate the payment of your mortgage and see how much it would take to pay off the loan in 30 years.
Getting a mortgage
Before you can find a mortgage lender, you need to qualify for one. This means having a sufficient credit score and enough income to cover your monthly mortgage payments, property taxes and other expenses associated with owning your new home.
Then, your credit history and other financial data will be reviewed by the mortgage lender to determine whether you are a good candidate for a mortgage. The higher your credit score and fewer red flags on your credit report, the better chance you have of qualifying for a low-interest mortgage loan.
Using a Mortgage Calculator
When youre ready to start the mortgage application process, your lender will send you a Loan Estimate that shows how much you can afford to borrow. It also lets you compare the rates and fees of different lenders.
Once you’ve found a mortgage that’s affordable for you, your next step is to apply for it. This will involve submitting paperwork to the lender, which will check your income, credit and other financial information.
Your application will also include details about your down payment and the loan terms you want. Ideally, you should put down at least 20% of the purchase price to qualify for the best loan options.
You should also factor in recurring costs such as property taxes, homeowners insurance and HOA fees when you’re figuring out how much your monthly mortgage payment will be. These expenses usually increase with inflation and are added to your monthly mortgage payment each month.
In most cases, the recurring costs will not affect your monthly payment, but they will add up over time and may lead to additional debt and other complications. You can input these additional expenses in the recurring cost category of the mortgage calculator, and you can toggle between a monthly and an annual view for easier comparisons.
The APR of a mortgage
Your mortgage rate is a key factor in your monthly payment because it is used to determine how much of the total cost of the loan goes toward paying back the principal. The APR is the combined interest rate, fees, points and other lender charges you pay on a loan.
It is important to understand how the APR affects your payment so that you can choose a mortgage that works for your budget and lifestyle. This will help you keep your monthly debt-to-income ratio (DTI) as low as possible, which will allow you to qualify for a lower interest rate and save you money over the life of the loan.
