How Do I Figure Home Mortgage Rates?
- 1). Use a free online mortgage calculator such as those found at Realtor.com or Mortgage101.com to obtain an estimate of what your monthly payments on principal and interest will be. Key in the total mortgage amount, the number of years in the loan term, and the interest rate offered by your lending institution. Understand that this calculation will be accurate only if you have a fixed interest rate.
- 2). Make a down payment of at least 20 percent on the home to avoid having to pay for private mortgage insurance. Put down less than 20 percent on the house if you cannot afford such a big down payment, but be prepared to face PMI expenses imposed by the bank. Check with your lender to find out what annual PMI percentage it charges. Multiply the annual PMI percentage by the overall mortgage amount. Divide the resulting figure by 12 and you will have the approximate monthly PMI payment amount.
- 3). Determine the monthly cost of homeowner's insurance. Lenders require borrowers to insure houses to protect the investment from fire, flooding and other damages. Figure out if you will be buying insurance from an external agency or directly from a bank-sponsored program. Ask for annual and monthly price quotes from the bank or the outside insurance agency to see how much you will pay based on the value of the house and the associated risk factors of the property.
- 4). Calculate your property tax expenses. Decide if you want to make monthly mortgage escrow payments toward your annual property taxes or save or invest your money in an interest-earning account so you can pay at the end of the tax year without scrambling to scrape together the cash. Get the millage tax rates from the local housing authority. Figure out your property taxes by dividing the value of the home by 1,000 and then multiplying the result by the local millage rate. For instance, if your property has an assessed value of $100,000 and the district's millage rate is 5.0 then you would owe $500 in property taxes for the year. Divide the annual figure by 12 to determine how much money you need to save or put in escrow each month.
- 5). Add all elements together to figure the approximate amount you will need to pay each month for your mortgage. Include monthly payments for principal, interest, homeowner's insurance, property tax escrow and private mortgage insurance, if applicable.
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