I've found there is a lot of confusion when using online mortgage calculators to try and estimate payments when buying a home. Most calculators just give principal & interest, and there is good reason, but it's nice to have the big picture when trying to estimate payments - as these days it is more common to have an escrow account where property taxes/homeowners insurance is paid along with the principal & interest portion of the mortgage payment. Plus even if you don't pay those items along with your mortgage payment you'll see want to be aware of their costs.
The makeup of a mortgage payment can consist of: principal & interest on the loan, property taxes, homeowners insurance, mortgage insurance, and flood insurance. Other items to be aware of are any homeowners association (HOA) fees that your specific neighborhood, community or city might have. The reason for the underlined letters is that is what generally makes up the mortgage payment - PITI, the other items aren't always charged (on condos homeowners insurance isn't required either).
Principal & interest is easy to calculate as like I said, all online mortgage calculators can calculate that as you just input a loan amount, interest rate, and loan term (15 years, 30 years, etc.).
Property taxes are a little trickier. Most think that you just take the current property taxes but that can be misleading. What the current property taxes are is what the current owner is paying, not necessarily what you will be paying, they could be but not always. To get a real good idea of what your property taxes will be after you purchase the home call the county's assessor and ask if anything triggers a re-assessment of a properties value, if re-assessments are done on a set schedule, etc. and all other types of questions you'd like to know about how they determine a properties assessed value. Values can be assessed in various ways but the most common that I've seen is when it's based on the new sales price (where a % of the sales price, or a formula based on the sales price, determines what the new amount of property taxes are), is on a set schedule to assess (such as every 12 months, 2 years, etc.), or when an additional impovement has been placed on the property (such as when a home is put up, or a casita addition out back in the yard, etc.). If taxes are re-assessed on a set schedule in a lot of cases it is not based on the new sales price, just based on the general direction of home values. Whatever the case is, you now know when, what triggers a re-assessment, and what the assessed value would like be. But that doesn't answer what the property taxes are, just the assessed value. So next you need to contact the county treasurer's office or in some cases it's actually just called the tax collector, these are the people that collect the property taxes from you. In less populated areas this could also be the same as the assessor's office. You'd supply the tax collector people with the assessed value you determined by using the information the assessor gave you, an address you have in mind or perhaps just a street name, zip code or school district, and ask what the formula would be to determine how much the property taxes are. It can be simple or have multiple steps and involve some algebra, either way it's important to know so you can properly budget for your new home. I'd also ask if the formula is different for other areas, as it often is. Here in California property taxes are re-assessed when a home is sold or transferred, they take the new sales price or value minus a $7,000 homeowners exemption (if owner occupied), multiplied typically by 1%, and that equals the base amount of property taxes, and then any special assessments/mello-roos is added on top of that (usually flat $ amounts).
Homeowners insurance isn't as involved to determine. The best way to determine what you could be paying for homeowners insurance is simply by calling up a homeowners insurance agent and inquire about quotes. Depending on the square footage of the home, sales price/value, proximity to a fire hydrant, type of roof, if it has an alarm system or not, amongst other items determines the annual premium - but you can always be as general or specific as you'd like when you ask for the quote. When you talk to the insurance agent you can also find out if any other special type of insurance is generally required or taken in your area, such as flood insurance if you are in a low lying area (some of the central plains states, Florida and parts of Louisiana), or hurricane insurance (Gulf Coast areas), or earthquake insurance (if you live along/near a fault line). I've seen insurance policies as cheap as a few hundred bucks all the way up to several thousands (and that was just a normal sized home in Florida).
Mortgage insurance is another item that may be included in your mortgage payment. Mortgage insurance is becoming more common as the use of FHA, and the reduction of the % of your home's value a 2nd mortgage can go up to (called the "loan to value" or LTV), have developed. When you have 20% down (or can get the 1st mortgages LTV to 80% or below) with conventional financing mortgage insurance is not required - however when the 1st mortgages LTV exceeds 80% then an extra insurance policy is needed to protect the lender in the event you default on your mortgage, that is private mortgage insurance (PMI). FHA requires mortgage insurance (MI) too, but is waived after you've paid it for at least 5 years and until your LTV gets to 78% of the original value, or you take a 15-year mortgage term or less and have 10% equity/down payment. Since conventional financing relies on the use of 3rd party insurers, it's called PMI, FHA is self insured by HUD, and therefore is just MI. When talking about it in general though either is common to use. The amount of MI is based upon your loan amount, it's either .55% or .5% per year, divided over your 12 monthly payments each year. PMI is also based on your loan amount, as well as FICO score, loan program type, property type, occupancy type, LTV, purpose, etc. PMI can also come in various forms rather than the straight additional amount added to the other portions of the mortgage paymet, you can take a slightly higher rate in trade for not paying the monthly amount, pay an upfront lump sum to buy it out, and other options depending on what the mortgage lender has set up with it's PMI vendors VA & USDA loans do not have monthly MI.
Lastly, in some areas (newer areas) you might have homeowners association (HOA) fees. The development you are buying in could have HOA fees to keep up it's common areas, the landscaping in your own yard, the electric gate that leads to your neighborhood. Then that development could be part of a community/city which could have more common elements such as a clubhouse, a pool/splash park, trails, skate park, etc. HOA fees on a condo will be more than they would be on a house, if any at all. This is because on a condo the HOA fee usually includes a homeowners insurance policy that covers the dwelling (not personal or liability coverage though). So if the condo burns down it could be rebuilt, but all of your items inside would not be replaced or value reimbursed to you, and the neighbor who trips over your garden hose and busts his teeth while escaping the fire would not be covered either. Because of that you should also look into getting an additional condo policy for those extra coverage areas, usually runs just a few hundred a year.
Ginnie Mae has put out a mortgage calculator that compares FHA, VA & Conventional payments given a sales price, interest rate and any funds for down payment you may have. You can edit/add/remove property taxes, insurance, HOA fees and even a space for utilities & maintenace costs. Once you gather the above information, and know what interest rates you could expect to qualify for, you can accurately estimate your payments on your own. You should find that the P&I portion of the payment is not the same amongst FHA, VA & Conventional given the same loan amount/interest rate... this is because on FHA & VA loans there is an additional upfront cost not found on conventional loans (FHA has an upfront mortgage insurance premium, UFMIP, and VA has a funding fee usually).
Ginnie Mae mortgage calculator: http://www.ginniemae.gov/2_prequal/le_intro_questions.asp?section=ypth
Example of my county treasurer's website where you can get current tax rates, tax amounts, and estimate taxes (saves a call to the treasurer): http://tax.ocgov.com/tcweb/search_page.asp
One PMI provider's PMI rate/amount calculator (most user friendly one I've found): http://www.mgic.com/is/html/ratefinder.html
FHA current MI rates/guidelines: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-22ml.doc
Shane Milne
Loan Officer
949-273-4161 phone
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