Anyone who is looking to buy a new home will be interested in understanding the total cost of doing so. For first time buyers, it is an especially nerve-racking process as there are many costs they did not anticipate when they first started planning to buy their home. Many people will use an online monthly mortgage payment calculator to try and estimate what their monthly payment is likely to be.
Often when someone is inexperienced with buying a home, they are unaware of the many costs involved. First is the cost of actually buying the home. Most mortgage lenders will want the buyer to put a 20% down payment so the lender is left financing only 80%. But there is also closing cost that typically is 7% and there are professional services that will need to be paid for, such as an attorney, home inspection, and title search. There are other possible expenses such as title insurance and so on.
When someone uses an online monthly mortgage payment calculator, they often do not include enough information to get the correct monthly payment. For example, if the home is being purchased for $300,000 with a $50,000 down payment. That leaves $250,000 as the mortgage amount. That is, of course, assuming that the buyer is able to pay all of the closing and other cost related to the purchase in addition to the down payment. If not then the total amount financed would be more.
But using just the simple example above, if the buyer put in the mortgage amount based on a 30 year loan and a 4% interest rate, then their monthly payment would be $1,193.54 a month. Assuming that amount was reasonable then the buyer would set out to find the home of their choice in that price range.
The problem is that there are other costs they failed to enter into the calculator. Once they enter in property tax and homeowners insurance, which is required by the lender, then their payment goes to $1693.54. That is considerably higher. But many housing developments also have a homeowners association also known as an HOA. Their fees vary widely depending on many variables. But a common fee would be $150.00 a month. That would raise the total monthly payment to $1843.54. For most people, the difference of $1,193.54 and $1843.54 would be too great for them to afford.
If the buyer needed to include part of the closing cost or other expenses involved with the purchase then the monthly payment could be over $2000.00 a month. A calculator is only as good as the information put into it. When using the mortgage calculator it is important that the home buyer is aware of the other cost and enter that information so the correct monthly payment will be shown.
Buying a home is an exciting thing. Getting the home a buyer wants and can afford is a matter of planning and research so they are aware of all cost involved. But once they have all the information, an online mortgage calculator can be an easy way to know how much the monthly payment will be.