The Homes for Heroes mortgage calculator helps to determine an estimate of how much house you can afford before going through the home buying process. It will help you understand and plan for your ongoing financial commitment if you choose to purchase a home. There are four main amounts that make up your monthly mortgage payment: principal, interest rate, property tax and insurance (PITI). Learn how the Homes for Heroes mortgage calculator breaks out an estimate of each for different loan types and provides a total estimate of your monthly mortgage payments.
Homes for Heroes Mortgage Calculator
The Homes for Heroes mortgage calculator will help you get an estimate of your monthly mortgage payment. It also allows you to select different home loan types (including a VA Loan) for easy comparison.
Be sure to click the “Calculate” button at the bottom of the calculator. Once you do, you will receive an estimate for your monthly mortgage payment. It itemizes the specific amounts that make up your monthly mortgage payment. Use this report to determine a home price that fits your budget. If the calculations do not work for your situation, change what you enter into the mortgage calculator until you find the right numbers.
NOTE: Be sure to read on after filling out your information to learn more about what makes up your monthly mortgage payment; including principal, interest rate, property tax and insurance (PITI).
Principal, Interest, Taxes and Insurance (PITI) Explained
There are four main amounts that make up your mortgage payment: Principal, Interest Rate, Property Tax and Insurance. You may hear mortgage lenders refer to this as “PITI.” Let’s take a look at each and how it can impact your mortgage payment.
The “P” in PITI refers to the principal of your home loan. The principal makes up the largest chunk of your monthly mortgage payment. The principal is not necessarily the price of the home. In fact, the principal of your home loan is rarely the price of your home. The principal of your home loan equals the purchase price minus the down payment and any fees you choose to roll into your home loan. For instance, if you purchase a home that’s priced $200,000 and put down a $10,000 down payment, the principal of your home loan is $190,000.
Reducing the principal of your home loan will reduce your monthly mortgage payments. There are two ways you can do this:
1) Purchase a less expensive house
2) Put a larger down payment on your home loan
Mortgage INTEREST Rate
The first “I” in PITI is interest. The interest you pay is based on an “interest rate.” The United States Federal Reserve dictates the baseline for home loan interest rates. This is the starting point. Lenders use the Fed’s interest rate information as a baseline to calculate a home buyer’s home loan interest rate. However, the following important factors also play into the interest rate you will receive: loan type, your credit score and down payment amount.
The type of loan you’re pre-approved to receive, the amount of your down payment, and your credit score all play a big role in the interest rate you receive. FHA loans typically have a higher interest rate versus conventional loans. But, it’s easier to qualify for an FHA loan. Generally speaking, the higher your credit score the lower your interest rate. The more you put down as a down payment will typically lower your interest rate as well.
Lenders look at these factors because each loan a lender approves comes with risk. The risk is a borrower may not pay back the loan. For example, home buyers who receive a conventional loan, with a higher credit score and a large down payment provide lenders with more confidence. This homebuyer often receives a lower interest rate.
You can always get an interest rate estimate online. It’s a good place to start. You can enter the interest rate estimate into the Homes for Heroes mortgage calculator. It is worth knowing interest rates can vary from lender to lender. The most accurate interest rate estimate will come directly from the lender you choose to do your home loan pre-approval.
Homes for Heroes mortgage specialists provide competitive mortgage rates AND they will save you an average of $500 on lending fees. Simply register online with Homes for Heroes and a mortgage specialist in your area will contact you and answer all of your mortgage questions.
There are three main actions you can take to reduce your interest rate:
1) Shop and Compare: Shop different mortgage lenders and compare interest rates. Just as you would shop for the best price on anything else, a home loan is no different. Check out different lenders and compare interest rates to get the best price, and work with a lender who provides the level of service you deserve.
2) Increase Down Payment: If there is room in your budget, making a larger down payment on your home loan can reduce your monthly mortgage payments by reducing the principal of your home loan, but it may also reduce the interest rate you receive on your home loan.
3) Improve Credit Score: Clean up your credit score by removing any discrepancies on your credit report and paying off your debt, especially any delinquent credit cards or loans.
The “T” stands for taxes in PITI and everyone is required to pay property tax when they purchase a home. There is not a standard tax rate for everyone. Property tax rates are determined by the local government where the house you want to buy is located. The location of the property and the value of the home will determine the tax rate you will be responsible for paying.
If you plan to purchase a home in a neighborhood requiring a lot of funding to support public amenities such as schools, parks and community facilities; it is likely you will pay higher taxes. You can always get a ballpark tax rate estimate online and add your property tax rate estimate to the Homes for Heroes mortgage calculator. However, the best way to get a good property tax rate estimate is to ask your agent or lender. They are familiar with the local market and the value of similar houses in the area.
Homeowners and Mortgage INSURANCE
The final “I” in PITI is insurance. Homeowners insurance (also called property insurance) and mortgage insurance are two different types of insurance often added to your monthly mortgage payment. Both estimates can be entered into the Homes for Heroes mortgage calculator.
Homeowners (Property) Insurance
The main role of homeowners insurance is to cover any major expenses that come from damage, theft and personal injuries on your property. The homeowners insurance rate you pay is determined by the property value and property location. How susceptible the property is to natural disasters, such as flooding or earthquakes, can impact your homeowners insurance cost. The easiest way to get an accurate estimate for the rate you’ll pay for homeowners insurance is to get a quote from your insurance agent. Be prepared to provide them with a neighborhood and approximate home value (price). Simply enter the homeowners insurance estimate from your insurance agent into the Homes for Heroes mortgage calculator.
Whether you need to pay mortgage insurance depends on your mortgage loan type and the amount of money used for a down payment. The two types of mortgage insurance are Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP).
Private Mortgage Insurance (PMI): Private mortgage insurance is paid by a home buyer to cover a mortgage default for the lender. This insurance protects the mortgage lender and is required when the home buyer is buys a home with less than a 20% down payment on the home price.
Mortgage Insurance Premium (MIP): A mortgage insurance premium is exactly the same thing as private mortgage insurance, but mortgage insurance premiums are applied specifically to FHA loans. If you do not receive an FHA loan, you will not pay a mortgage insurance premium (MIP).
When you’re ready to speak with a qualified mortgage specialist in your area about getting pre-approved for a home loan simply register with Homes for Heroes and our local mortgage specialist will contact you, answer all of your questions and get you on the right path to a new home and significant savings!