When we first started on our new home search I had spent probably three to four months doing tons of research on different loans, processes, the best way to get the most bang for our pennies. I came across several home loan calculators to use that would calculate various APRs, interests, principles, and more. Since we wanted to get out of the disgusting apartment we were living in and own a home, we were bound and determined to figure out how we could manage to buy a home.
When we started looking, at the time, I was not making a lot of money as a blogger, so we could not use my income, so we had to go completely off of my husband's income. At the time, it was not much, but it was enough to qualify us for the USDA home loan. He had a little bit of credit, just barely enough, but enough that we were able to be approved for $230k for a loan.
We did not want an outrageous amount for our loan. That would have made our payments close to about $1300 per month, which was $500 more than what we wanted a month, and be able to afford everything else that comes with owning a home. Using home loan calculators helped us decide the maximum amount we could afford monthly.
When we sat down with our loan officer, we explained, while we were pre-approved for $230k, we wanted to keep it on the lower end and closer to $125k – $135k. They were surprised, mostly because people often go for the highest amount they are approved for. I mean if you can afford it, by all means, go for it. But, it is wise to figure out surprise expenses, fluctuation in your income (loss of jobs, job changes, medical emergencies, etc), and ensure that you are not in over your head.
In order to figure out what you can comfortably pay each month for a mortgage, whether it is a USDA, FHA, VA, etc, you need to evaluate your current expenses and add 20% to each utility if you are currently living in an apartment or a smaller home. If you do not pay for a utility because it is included in your rent, you can always ask your landlord or property manager if they can provide your usage and figure out the cost.
Now when it comes to home maintenance, a good rule of thumb is about 1% of the home's value, though individual homes can vary widely depending on age, condition, and local labor costs. Many new homes come with a 10-year warranty. If you decide on purchasing an older home, as we did, you may want to figure out a decent amount that needs to be put into maintenance savings account in case something comes up like a broken furnace, flooded basement, structural issues, etc.
Right now, we are actually having to pull money out of our savings in order to build new steps into the home because the steps that were installed started falling apart. My guess is because they put outdoor carpeting on them, which ended up doing more damage to the cement steps than just putting rubber grips causing the concrete to crack and crumble.
If you do not have the credit to purchase a home right now, it is not hard to fix that. It will take time, so do not think that you can just apply for a new credit card or pay off a credit card or debt and your score will skyrocket. That is not how it works at all. You have to work at it, use credit cards, pay them down, etc. So using home loan calculators, you get a heads up on how much you are looking at spending for a home.
5 Honest Home Loan Calculators to Use Before Shopping
Advance Mortgage Calculator
This is one type of full-featured home loan calculators that allows you to input home value, principal, interest rate, loan term, start date, property tax, HOA dues, homeowner's insurance, and PMI. You can check it out here: Advance Mortgage Calculator by MortgageCalulator.info
This is a great calculator that gives you all of the information in one summary. If you are looking for something that will give you the information that you need in order to make an informed decision on buying a home for the first time or maybe purchasing a new home in general, this is one of the most detailed home loan calculators you will want to check out.
Bi-weekly Mortgage Payment Calculator
Want to pay your mortgage down quicker? Home loan calculators such as this one are used to discover how much time and money you will save by making regular biweekly payments instead of monthly payments on your home. This calculator presumes one starts making biweekly payments at the onset of the mortgage.
The advantages of paying down your mortgage quicker is you get out of paying on your home longer and sometimes you pay less over time because you are putting more towards your principle instead of all of that interest. There can be a disadvantage though, some times there are early termination or early pay off fees. So contact your lender to find out if there are any early termination fees before you decide to start paying down and an escalated rate.
Calculate Your Home Ownership Tax Benefits
Buying a home can save you thousands of dollars in income tax payments while also allowing you to make hundreds or even thousands of dollars in untaxed capital gains on the sale of your primary residence. Use this calculator to find out how much your potential interest-expense income tax deductions are and if it makes sense to itemize your taxes.
When using home loan calculators, there are always more factors that may show up when you actually sit down with your lender or loan officer. Be sure to come prepared. When you meet with them, be sure to bring the following items:
- State ID for anyone who is applying for the loan
- Social Security Cards
- Bank Statements
- Tax Paperwork for at least 2-3 years
- A list of your expenses outside of housing (credit cards, student loans, etc)
While they will see the credit card, student loans, car loans, etc when they pull your credit, you know how much you are actually paying monthly, so you know what you can afford while taking these into account.