While looking for your dream property, you have probably come across a variety of mortgage calculators.
It seems that every bank and real estate website has its own mortgage calculator, and they are rarely in sync with each other. In fact, if you have tried inputting your information into a few of them, you may have found that they gave you different numbers.
Why is this?
Missing Information
For a calculator to be useful, it must use all of the information that is taken into account when a lender calculates a mortgage. Otherwise, you are getting an incomplete picture, and that is something nobody wants when it comes to finances.
Unfortunately, it is almost a given that mortgage calculators will be missing information.
For starters, most do not check your credit report. This means that any interest rate generated by the mortgage calculator is not based on an assessment of your financial history. While some calculators may ask you whether you have good, fair, or bad credit, that is generally the extent of their credit history check.
This is not the only information missing, though. Some mortgage calculators fail to include property taxes into their estimates, while others skip information about mortgage insurance or home association fees.
In addition, because these calculators are intended to provide users with a monthly estimate, they do not figure closing costs or other add-ons into their calculations. This can be problematic for borrowers who choose to roll some of these costs into their mortgages.
Low-Interest Rates
Another common issue with mortgage calculators is the interest rates they provide.
Often, mortgage calculators use potential mortgage interest rates that are on the low end. This can lead to users thinking they are going to get a great interest rate. In reality, because the calculator probably did not consider the user’s creditworthiness, they are just getting false hope.
While interest rates are at record lows right now, eligible borrowers still need to have good or excellent credit in order to get those covetable low rates.
When you speak with a mortgage professional, you can better determine the interest rate you can expect. They will take a more in-depth look at your finances, including your credit score and your debt to credit ratio. Doing so allows them to provide you with the best estimate. Plus, a mortgage professional will help you shop around for the best terms and rates, saving you the trouble.
They Want Something
Ultimately, mortgage calculators are a tool for mortgage lenders to get your information. This is not always clear upfront.
Whether it is on the Realtor.com app or on a real estate listing aggregator, mortgage calculators are generally tied to a specific company. They allow you to quickly send your contact information to a lender, who will then call you to get more specifics.
This is fine if you know who you want to borrow from. However, if you are going to score the best interest rates and find competitive terms, you should ask your Tampa Realtor to recommend a mortgage professional.
What Information Do You Need to Estimate a House Payment?
When you apply for a mortgage, you will receive a loan estimate that helps detail your potential payment. However, even this is not the most accurate picture. Ultimately, you will not know your complete payment until you close on your home, but your loan estimate will at least help you prepare and budget.
If you are looking to get a better ballpark figure on your potential monthly payments, grab a pen and paper. To generate an accurate estimate of your future mortgage payments, you need the following information.
Down Payment
Depending on the type of loan you are applying for, you will need to put down a percentage of the home’s value. How much you put down will impact your monthly payment and determine whether you will need to pay private mortgage insurance (PMI). Many lenders require borrowers with a down payment of less than 20% of the home’s value to secure PMI.
Mortgage
The mortgage amount is how much you will actually be borrowing from the bank. Mortgage calculators often just subtract the down payment from the home’s cost to determine the mortgage amount.
Your final mortgage amount may include more than that, though. For example, if you roll the closing costs into the mortgage, your mortgage may be higher than the home’s selling price.
Interest
Interest rates are low right now, but that does not mean everyone is eligible for the lowest rates.
Property Taxes
In Hillsborough County, the average effective property tax rate is 1.02%. This is assessed yearly on January 1st. Note that the assessed value of a property is different from its selling price. You can ask your Realtor about the assessed value of a property and how much the previous owner paid in taxes to help provide you with a better estimate.
Depending on your lender, your yearly property taxes may need to be escrowed. This means that your monthly mortgage payment will include a tax payment that goes into a special account. At year’s end, the accrued amount will pay for your property taxes.
Insurance
If your lender requires PMI or other homeowners’ insurance, you will want to calculate that as part of your monthly costs. Freddie Mac estimates borrowers pay between $30 to $70 a month per every $100,000 borrowed. So if you borrowed $400,000, your PMI could be as high as $280 a month.
If you want to understand a home’s expenses fully, you will also want information about the area taxes, utility payments, and any homeowner or condo association fees. This is all information you can get from a skilled Realtor and will help provide a better picture of what a home costs beyond just a monthly mortgage payment. While some real estate websites offer some of this information, it is often not complete. Get the full picture from your Tampa Realtor and take some of the guesswork out of buying a home.