Home Affordability Calculator
Buying your dream home may be an exciting moment in your life but before you take a giant leap into the unknown, you must need to know just how much of it you can truly afford. For this, a home affordability calculator will be truly helpful in giving you the figures you need before you even start shopping around. Using a home affordability calculator is a smart move that any home buyer shouldn’t miss. By having the end amount in mind, you can easily know your qualification for the home you’re planning to purchase, and if it is within your budget’s price range.
There are many online home affordability calculators that you can find on the web and you can just bookmark your top choice. All you need to do is to enter the dollar amount on the space provided and the home affordability calculator will do the calculations for you. That simple! A home affordability calculator helps you measure how much you can and cannot afford, where you can have an answer in less than a minute.
How Does a Home Affordability Calculator Work?
Like many of your mortgage calculators, you will need to enter your gross monthly income, the amount of down payment you can pay, your monthly minimum total credit payments, your yearly home insurance premium payment, your yearly property tax, and the payments and interest rate of your home loan. You must choose a home affordability calculator that takes your property tax and insurance payments into consideration. These are your major home expenses which you cannot do without and these must be included in computing for the estimates of your home’s affordability, on top of the computations for your home mortgage interest and monthly payments.
Why Should You Use a Home Affordability Calculator?
The last thing you need is to have a surprise charge that’s way beyond your budget and to use a home affordability calculator helps you in:
1. Refinancing
You can easily know if the refinancing scheme is affordable enough, or if a lower loan interest rate can help you lower your monthly loan payments.
2. Early Loan Pay-Off
To use a home affordability calculator gives you an idea of how much you may be paying, which can help you plan your future finances so you can pay off your loan earlier than the end of your loan’s term.
3. Having Low Monthly Payments
If you plan to consolidate your debts, knowing just how much a home is will help you come up with ways of merging all your other loans into one, making it easier on your pocket.
4. Knowing the Value of Your Home Equity
By computing the affordability of your home, you also get an idea of the value of the property you want to purchase, which is specially useful when you want to borrow against your home equity for future home improvement projects.
5. Choosing the Best Home Loan Option
By knowing just how much you can afford for your dream home, you can compare various home loan options better and choose the best deal with interest rates that are easy on your budget.
After having used a home affordability calculator, you are one step closer to purchasing a home. Normally, the calculations are based on your monthly debt-to-income or DTI ratio. In reality, there are lenders who will demand a higher DTI than those used by online home affordability calculators that you can find. This means the selling price of the home is higher than what was estimated. As a general rule, you need to put some allowance that is more than the estimated monthly payment amount computed by the home affordability calculator you have used. Gauge Your Expenses!
RESOURCES:
Quicken Loans, Inc. “ How Much House Can You Afford. “ 2000 – 2009.
https://www.quickenloans.com/mortgage-calculator/home-affordability
Ginnie Mae. “ How Much Home Can You Afford? “
http://www.ginniemae.gov/2_prequal/intro_questions.asp?Section=YPTH
Hardy, Marcelina. “ Online Calculators: A Tool for Homebuyers and Homeowners. “
November 2009. http://www.homespace.com/2009/11/08/online-calculators-a-tool-for-homebuyers-and-homeowners/
Lending Tree, LLC. “ Using a Home Affordability Calculator. “ April 2009.
http://www.lendingtree.com/mortgage-loans/calculators/mortgage-calculator-tips/using-a-home-affordability-calculator/
