Are you about to apply for a home loan program to finance a home? Great decision! But before you apply for a loan, it is crucial for you to know how much home you can afford. Worried about how to know that? Well, a home loan calculator can help you with this. It is an online tool that can help you know your home affordability based on some crucial things.
And before you use a mortgage calculator Houston, you need to know what the things are. To help you, here we have put together a few variables that you need to enter, which play a crucial role in deciding your home affordability –
It is the initial input that you have to input based on your income, credit scores, monthly debt payment, and down payment savings. A percentage you may hear when buying a home is the 36% rule. According to the rule, you should aim for a debt-to-income ratio of roughly 36% or less when applying for a home loan. This ratio helps your lender understand your financial capacity to pay your mortgage each month. The lower the ratio the better it would be for you. In order to calculate your DTI, add all your monthly debt payments, including credit card debt, student loans, auto loans, child support, and more. Then, divide by your monthly, pre-text income. In order to get a percentage, multiple by 100. The number you are left with is your DTI.
The mortgage rate is the rate of interest that you have to pay over the life of the loan. It is another important thing that you need to enter in the calculator. If you don’t have an idea of what you’d qualify for, you can always put an estimated rate by using the current rate trends found on the lender’s mortgage page. You should keep this in mind; your actual mortgage rate is based on a number of factors, including your credit score and debt-to-income ratio.
The next thing that you have to choose is the loan term. You can choose a 30-fixed rate mortgage, 15-year fixed-rate mortgage, or 5/1 ARM. The prior two options, as the name suggests, are fixed-rate loans. Thus means, your interest rate and monthly payments stay the same over the course of the entire loan. On the other hand, an ARM or an adjustable-rate mortgage has an interest rate, which will change after an initial fixed-rate period. Generally, after the introductory period, the interest rate of an ARM will change once a year. Based on the economic situation, the rate can increase or decrease. Most people choose 30-year fixed-rate loans, but if you’re planning on moving in a few years or flipping the house, an ARM can potentially offer you a lower initial rate.
Besides the mentioned ones, you also need to include payments per year, type of loan, market value, monthly income, etc. If it is possible for you to include an accurate value, then enter near-accurate ones, so that the calculator can give you a proper result.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.