When you want to estimate your monthly mortgage payments before applying for a home loan program, using a home loan calculator is the ideal choice for you. It is an online tool that lets you know how much home you can afford based on some inputs. And there are different types of calculators that help you know several things along with home affordability.
All that you need to do is to go online and use a mortgage loan calculator Texas. But before that, you would like to know about the inputs to enter. Here are the ones –
- Home price
It is the first input that you need to enter and it is based on your income, credit score, monthly debt payment and down payment savings. When buying a home, you will come to know that 36% is the rule. According to the rule, you should aim for a debt-to-income (DTI) ratio of roughly 36% or less when applying for a home loan. It helps a mortgage lender understand your financial capacity to pay your mortgage each month. The higher the ratio, the lower your chances to afford the mortgage.
To know your DTI, add all your monthly payments, including student loans, credit card debt, child support, auto loans, etc. And then divide by your monthly, pre-tax income. Multiply it by 100, and get the DTI percentage.
- Down payment
A down payment is an initial payment that a buyer needs to make to the lender. Generally, a 20% down payment is what most lenders expect for a conventional loan with no private mortgage insurance (PMI). But there are exceptions too. The down payment requirement is much lenient with government-backed loans. For instance, VA loans don’t need down payments, while FHA loans often allow as low as a 3% down payment. Generally, you should try to come with a 20% down payment.
With a good down payment, you can easily qualify for the best mortgage rate. Your income and credit score are the other two additional factors that will play an important role in determining your mortgage rate.
- Mortgage rate
Another crucial input for the calculator! A mortgage rate is the rate of the percentage that you need to pay over the life of the loan. With a lower rate, you can save a significant amount over the life of the loan. And this is why; buyers want to ensure the lowest rate.
If you don’t have any idea about the rate you can qualify for, you can always put an estimated rate by using the current rate trends found online.
Besides, you need to enter inputs like mortgage term, credit score and a few more things. So, give the inputs and know your home affordability.