Thursday, 30 July 2020

Ultimate Guide To Calculate Your Mortgage Payment

Calculating Your Mortgage Payment

We're going to talk about how to calculate your mortgage payment. There are three types of calculations you need to learn when you're going to be a homeowner, or you are going to become a homeowner. Once you figure out how to calculate your mortgage payment, then you can decide do you want to drop your purchase price? Do you want to be bringing a bigger down payment? Do you want to pay off debt? Do you want to add a cosigner?. Before you do anything like that, you need to figure out how to calculate your mortgage payment.




How To Calculate Your Mortgage Payment


I do not like these calculators on Zillow, Bank Rate, The balance. The principal and interest payments are correct. The things that are not correct, are the hazard insurance, the property taxes, the mortgage insurance. So these are the things that in this article, I'm going to show you how to calculate, so when you're punching the numbers into your mortgage calculator, you know how to change some of the rates, the tax rate, the mi rate, the hazard insurance rate, so you get an accurate payment.



What Makes Up Your Mortgage Payment

  1. Principal
  2. Interest
  3. Hazard Insurance
  4. Taxes
  5. Private Mortgage Insurance (PMI)
  6. Homeowner's Association (HOA)

When you're looking at your mortgage payment, you want to know the complete mortgage payment. Not just a principle and interest, because you also have hazard insurance, you have property taxes, you have private mortgage insurance, and people who are buying condos or you buying new development, you have HOA. So we have to figure out what the principle and interest are, what the hazard insurance is, what the taxes, the PMI, and the HOA. Most of the time, with the HOA, the seller will tell you this is your monthly HOA dues, there's no formula because everyone's HOA is different. That's what makes up your mortgage payment. To find out the numbers to all these things

You have to figure out
  • Purchase Price
  • Down Payment
  • Hazard Insurance Rate
  • Property Tax Rate 
  • PMI Rate
  • Mortgage Rate 


let's figure out before you do anything.


Home Seach - Create Your Profile

Figure out what the home is worth. Find out how much homes are being sold for, or if you're refinancing, type in the address, and find out what is the value of the property you're buying. That's the most important thing. Once you figure out your profile of the homes you're looking to purchase, the next step is figuring out the


Down Payment


When you're buying a house, it's either going to be 3% to 20% down. After 3.5%, its increments of 5% down, yes, you can do 7.5% down if you want an exact payment. But when you're purchasing your house, lenders always do it by either 1% financing, 3% down, 3.5% down, 5% down, 10% down, 15% down, 20% down. I think when you go past 450,000, 400,000, I think you should do a down payment. The gap of a payment that's non-down payment systems compared to down payment systems, it starts getting too big past 400,000, it's worth putting a down payment. Definitely figure out the purchase price, and figure out how much can you put down. But also remember, the closing cost is about 2.5% to 3.5%, it all depends on the purchase price and loan amount, and when you plan on closing. Look at the purchase price, find out what can I save, and once you decide that, then you can go to the next step.


Loan Amount



FHA Loan

Once you have your purchase price, and you decide your down payment, you can figure out your loan amount. Because to figure out your complete mortgage payment, you need that purchase price, you need that loan amount. Remember, on FHA loan, its purchase price, minus the down payment, and right now in 2020, it's 3.5% down, plus the upfront MI which is 1.7%. That will give you a new loan amount 

VA Loan

The loan purchase price, minus the down payment which is none for VA, plus the funding fee, it's 2.3% right now, not 2.15%, is from an old slide. It's 2.3%, that gives your new loan amount.

Conventional 

It's the purchase price, minus the down payment. So you'd only 3% down, 5% down, 10% down, 15% down. With conventional there's no funding fee, there's no upfront MI, is just the purchase price, minus the down payment.

Once you have the loan amounts, now you can take it to the next step.


Hazard Insurance Rates


Figuring out the hazard insurance, hazard insurance is based on your loan amount. So it's the loan amount, times, the hazard insurance rate, which is typically 0.15 to 0.25. The 0.15 it's very standard hazard insurance, the 0.25 is like the Ferrari hazard insurance, depending on the type of house insurance you want to get. It's the loan amount, times, either 0.15% or 0.25%, divided by 12, that is your monthly hazard insurance. When you're using a mortgage calculator from Zillow, Redfin, you might not need to divide by 12 because they put in your yearly hazard insurance. But if they let you put a monthly in, divide by 12. If they don't let you put in a monthly, just take the loan amount, times it by either 0.15 or 0.20 up to 0.25, figure out your yearly hazard insurance. This covers if your house burns down, if there are any issues, with hazards, it protects your home. Protects the lender. So definitely, once you know your hazard, you put it in your calculator. The next step is your property taxes.


Tax Rate


Your property taxes are based on your purchase price, so once you decide your purchase price. Next is your tax rate. When you buy a home, typically, if they haven't figured out your tax rate yet because you haven't decided exactly what you want to buy, the industry standard is 1.25%. So it's your purchase price, times it by 1.25%, divided by 12, that should be what your property taxes are. On a refinance, you go off the original purchase price. On a purchase, you go off the purchase price. When you're figuring that out. 



Hopefully, now you know how to put together your mortgage payment on the Internet. 

Next step 

Upfront MI & VA Funding Fee


You need these numbers to figure out your mortgage payment next. With FHA it's 1.75% for upfront mortgage insurance. For VA, it's going to be 2.3%. Unless you have 10% disability or more, or you're a Purple Heart. Talk to your lender, every lender has a different tolerance on loan amounts.


FHA Mortgage Insurance


FHA is different than conventional, with FHA it doesn't matter you have a 580 credit score or 700 credit score. It's 0.85%, and you put less than 5% down. Typically, you're going to put 3.5% down, so it's your base loan amount, don't add that FHA upfront mi to it yet, is your base loan amount. Times it, by 0.85%, that rate stays the same. Divide that by 12. that's what your monthly mortgage insurance is if you're going FHA. If you're going to go with 5% down or more, it's the base loan amount, times it, by .0.80%, divided by 12. So now, that's you how you figure out your monthly FHA mortgage insurance.

Conventional Mortgage Insurance


For a conventional, it's a little bit different. Definitely reach out to a lender if you don't understand this. but just follow the guide right here at mgic rate cards. Start with the base rate and then your adjustments, look at your adjustments if it's a cash-out, self-employed if you're relocating if it's a manufacturer at home, is visit investment, if it's three units or four units. Definitely look on the rate card, your debt to income ratio, they mean, if your DTI before mi is over 45%, it's a big risk, there are adjustments to it, less than 45%, there's no risk. If there's two borrower's there's a benefit. So definitely look at this when you're trying to figure out conventional. If your credit score is between 700 to 720, go 5% down, and your mortgage insurance is cheaper than going FHA

If you can't go 5% down, and you have under 720, just go FHA the payment is cheaper. If you have a 720 credit score or higher, you can go 3% down or 5% down. The mortgage insurance is cheap, and the rates cheap, so the payment will be cheaper than going with an FHA loan. Going conventional 720 or above, 3% down or 5% down, 700 to 720 you got to go 5% down, under 700 if you're chasing the cheapest payment, FHA is your cheaper payment. If you're looking for closing costs, go FHA. Because FHA pound-for-pound, even though you takin a higher rate, you can get closing costs covered and that payment is cheaper than conventional. But if you have your own down payment, your own conventional, 720 or higher, go conventional. The payment will be cheaper, and the mortgage insurance will fall off once you have 20% equity.



  • Now that we figured out the purchase price, the loan amount, the tax rate, the house insurance rate, the mortgage insurance rate for FHA, and conventional. Once you have these numbers. The next step is to figure out interest rates.


Mortgage Interest Rate

Go to housingwire mortgage-rates-center



If you look on here, there's something called "optimal blue". Optimal blue is like Google for interest rates for lenders. Optimal Blue is a search engine for lenders, they buy optimal blue. All the rate sheets from all the different banks upload through optimal blue. And then lenders pick their rates, they pick their bank. This article was published on July 30th, 2020, where interest rates are at. So you can tell here rate indicator, if you had a 30-year fix, the average rate throughout the nation from all these lenders pulling rates, and locking them was 3.660%. 


  • Jumbo 30-year fixed, this is high balance, not jumbo if you're in the high balance area, 3.847%. 
  • FHA, 3.900%. 
  • VA, look how low VA is. VA has got the best deal on the Block right now, 3.421%.
  • USDA, 3.737%. 
  • 13 Year Fix Conforming 3.093% 

That's the rate indicator. Through that, you can punch that in, figure out your principal, and interest payment, and then with your purchase price, figure out the property taxes, with the hazard insurance rate against the loan amount, you can figure out your hazard insurance payment, and then your private mortgage insurance is based on your loan amount against the mortgage insurance rate. For FHA, it's 0.85, for conventional use the MGIC rate card, and now, you got your mortgage payment.




Conclusion

That is how you calculate your mortgage payment and other things you need to know. Hopefully, you got some value at out this 

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