Could a home loan make your dream of homeownership a reality? Or if you’re already a homeowner, could a refinance be your ticket to lower rates, monthly payments, and possibly cash for home renovations or updates? If either of these sounds like thoughts you’ve had regarding your home goals, you should use our mortgage calculator to determine how much of a home loan you could qualify for and what your prospective monthly mortgage payments might look like.
Use the Mortgage Payment Calculator below to find out.
Before you start looking for homes or talking with lenders about home loans, you should answer the following question: How much will I be able to borrow for a home loan? Understanding this will directly influence the size, type, and price of home you buy and what type of loan products you will be able to consider when discussing homes and mortgage options with your realtor and lender.
Use our mortgage calculator to find out how much you can borrow for a home loan. This mortgage calculator will let you investigate your current financial situation from both your outgoing costs (credit card debt, student loan debt, car payments, and other recurring monthly costs) and incoming earnings perspectives (salary and other investments). Once you have these amounts entered, you can manipulate the mortgage rates and terms, based on your personal preference, to get an estimated monthly mortgage payment.
Now that you’ve used our home loan calculator to know how much home you can afford, talk with a Mortgage Advisor to find a lender who can best help you buy your home. Contact a Mortgage Advisor at (866) 984-1240 or fill out our quick 1-minute form to have a Mortgage Advisor contact you.
Knowing how much you can borrow from the view of a lender or bank does not necessarily mean you should feel compelled to borrow that amount for a home. Our home loan calculator and the lenders institutions you will work with are there to help you understand the maximum amount you can borrow based upon your ability to repay. This is helpful information as it affects your strategy for looking at homes, but as you’re evaluating your home buying price using the mortgage calculator, you really should evaluate your mortgage price range from the perspective of your needs, wants, and home and family goals.
While you may be able to afford a $525,000 home based upon your current income, debts, and credit standing, you may want to consider what percentage of your future income you want to tie up into your mortgage payment for the next 15, 20, 30 years.
The monthly loan payment difference on a $450,000 loan vs. a $525,000 loan is $358 per month or a total interest difference of $54,000 over the life of the loan (4.0% APR, 30 year fixed rate, principal and interest only). Using our mortgage calculator to understand what you can afford and to determine a realistic monthly mortgage payment that won’t break your bank is a good practice to go through as you’re estimating your mortgage payments.
Your actual mortgage amount will be calculated by taking the loan’s principal amount, accumulated interest over the set term amount, taxes, and any required mortgage insurance costs. As a general rule, most mortgage lenders will try to keep your borrowing within 28 to 30 percent of your gross income on a conventional loan. Some lenders, depending on your financial situation and credit history, will allow you to borrow over 30 percent and in some cases, allow 40 percent.
Your debt-to-income ratio (DTI) is a lender’s way of measuring just how large of a monthly payment you can afford before your finances get overly strained. This ratio is valuable to lenders because when a borrower is financially strained, the lender has a higher risk of not being paid back and the borrower risks loan penalties or even loan default.
Debt-to-income ratio is measured as a percentage of your monthly income that goes to paying your mortgage debt obligations and it can be calculated by what is referred to as your “front-end” ratio or your “back-end” ratio.
Front-end DTI ratio measures how much of your gross monthly income will go to your mortgage payment – you can get this by taking your mortgage payment and dividing it by your gross monthly income. Conventional loans allow a front-end ratio of 28 percent whereas FHA loans allow this number to go as high as 31 percent. Taking the FHA loan for example: if you earn $5,000 per month, an FHA lender would qualify you for a monthly mortgage payment of no more than $1,550.
Back-end DTI ratio measures how much of your income goes to all of your debt obligations – from car loans and credit cards to student loans and mortgages. This measurement only takes into consideration your long-term debts that you won’t repay within the next 10 months. Conventional loans allow a back-end ratio of 36 percent whereas FHA loans allow this number to go as high as 43 percent. Using FHA loans as the example again: if you earn $5,000 per month, an FHA lender would qualify you for a monthly mortgage payment of no more than $2,150.
With a conventional loan, you will be subject to paying private mortgage insurance (PMI) if your down payment is less than 20%. With an FHA loan, you will also need to pay mortgage insurance premiums (MIP) to compensate for down payments below 20%. This insurance motivates lenders to take risks on lending to borrowers who have less cash up-front.
Just to be clear, the FHA and VA do not issue their respective loans, but they do insure them. In other words, if an FHA loan borrower defaults on their loan, the FHA will be required to pay the lender for it. This reduces the risk for FHA lenders and allows them to be more lenient with lending requirements than conventional lenders can be. This insurance is what makes FHA loans possible for millions of American homeowners.
Like all insurance, loan insurance must be paid for by someone. In the case of an FHA loan, you, the borrower, pay an Upfront Mortgage Insurance Premium (UFMIP) for this insurance, which is equal to 1.75% of the closing loan amount. This premium is usually added to the amount of the loan. Depending on the loan-to-value ratio, a monthly premium may exist, as well.
Calculating what this monthly mortgage insurance premium could be on an FHA loan is a bit more complicated. To calculate mortgage insurance payments, you multiply the loan amount by the insurance factor and then divide the product by 12. For instance, on a loan of $400,000 with an annual mortgage insurance premium of 120 basis points, the monthly MIP would be $400 per month.