This blog post is intended to give first time homebuyers a better understanding of how much a monthly mortgage payment would be, based on a purchase price. I find that a lot of times first time homebuyers do not realize that your monthly payment is not just the mortgage, but also taxes/insurance and a HOA payment depending on where you buy. This all may feel overwhelming at first, but the more you read about it and research it, the easier it becomes.
Before I give a few examples please note that rates change on a day to day basis, which will affect your mortgage payment. The examples below are Hypothetical Examples. Please don't assume that if you buy a home for the same price as the examples below, that your payments will be similar or the same. You can only truly find out where your payments will fall after speaking with a qualified mortgage broker or lender. One more time just to reiterate.... the scenarios below are only hypothetical examples!!! This post is just intended to get you thinking, and maybe even motivated to call a lender and find out what loan amount you qualify for, based on your personal situation.
Ok, moving on!!!
Here are a few terms you may want to get familiar with:
PITI: Principal..Interest..Taxes..Insurance (These are generally the 4 components of a mortgage payment)
Premium Mortgage Insurance: Mortgage insurance provided by nongovernment insurers, that protects a lender against loss if the borrower defaults.
Below are 2 examples of a FHA mortgage, based on 2 different loan amounts: For more information of FHA mortgages and how they work visit: http://www.fha.com/
The nice thing about FHA mortgages and why so many people are choosing them, is because IF you qualify, you could potentially put as little as 3.5% down.( Remember that just like rates the FHA guidelines change as well. Today it could be 3.5% and tomorrow 10%.)
Below are two hypothetical situations: They are in no way exact figures and will change from scenario to scenario and person to person. The only way to get more exact figures, and a quote tailored to your personal situation, is to contact a qualified mortgage broker or lender.
Here is the first hypothetical situation:
Purchase Price: $150,000
This is based on a 30 year fixed with a 5% interest rate.
With 3.5% down (in this case $5,250), you would be financing $144,750
Because of the down payment being under 20%, we factored in premium mortgage insurance to the loan, therefore making the loan amount $147,283.
This would hypothetically bring your Principal and Interest to approximately: $790 per month
After adding in Taxes and Insurance (remember PITI makes up a mortgage payment), which will vary based on location and home choice, your monthly payment could be in the ballpark of $1,100. Remember depending on where you buy, you may also have a HOA (home owners association) payment.
Hypothetical Situation Number 2
Purchase Price: $250,000
This is based on a 30 year fixed with a 5% interest rate.
With 3.5% down ( in this case $8,750), you would be financing $241,250
Because the down payment is under 20%, we factored in premium mortgage insurance to the loan, therefore making the loan amount $245,471. This PMI payment could be added to your monthly payment, but in this scenario, we rolled it in upfront.
This would hypothetically bring your Principal & Interest payment to $1,317 per month based on a 30 year fixed with a 5% interest rate.
After approximating taxes and insurance, your payment should fall in the ballpark of $1,800 per month
One last thing you cannot forget to account for is closing costs. Nothing is ever done for free, and buying a house is certainly not one of them. The best way to get an estimate of how much your closing costs will come too, is by asking for a GOOD FAITH ESTIMATE from your mortgage broker/lender. Currently, we are seeing it more and more where buyers are negotiating with sellers to cover their closing costs. This may be a possibility for you, but It will all depend on whether the lender will allow this, as well as whether or not the sellers agree.
If after reading this, you are ready to take the next step, you can either call me and I can answer some of your questions, or you can call a mortgage broker/ lender and start going over the numbers.
I HOPE THIS GOT YOU THINKING.....THAT WAS ALL IT WAS INTENDED TO DO!!!!
DON'T FORGET, IF YOU ARE A FIRST TIME HOMEBUYER AND PURCHASE BEFORE DEC 1ST 2009, YOU MAY BE ELIGIBLE FOR THE FIRST TIME HOMEBUYER TAX CREDIT....THIS COULD BE UP TO $8,000!!!!
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