Find out exactly how much home can you affordby Tim Manni
HSH.com has a mortgage calculator just for that. Our “How Much House Can I Afford” Calculator can give you an accurate sense of almost all your homebuying expenses. The calculator is simple and easy to use — just fill in the seven required fields and hit the “Click Here to Calculate” button.
Here’s how the calculator works (I’ll provide some examples):
Annual Income: Simply plug in your household’s yearly income (example: $90,000).
Monthly Credit Payments: Here’s the space where you enter in all your monthly bills — i.e. automobile and insurance payments, average credit card payments, student loans, electric, etc. (example: $1200).
Cash Down Payment: The default setting here is $20,000. Often times $20,000 doesn’t equal a 20 percent downpayment. If that’s the case, the final calculation will take private mortgage insurance into account (example: $20,000).
Property Taxes (percentage): The default setting on the calculator is one percent (1% = $1,000 per year for a $100K house). Let’s say you’re looking at a property worth $298,000, with annual property taxes of $6,500. To calculate the percentage of your yearly property taxes (for this calculator’s purposes), divide 298,000 by 6,500, then divide 100 into that number. The result is 2.18 (example: 2.18%).
Property Insurance (percentage): The default setting on the calculator is 0.5 percent. Until you really begin looking for a home, it may be hard to estimate what your property insurance will be. For this example, let’s stay with the default setting (example: 0.5%).
Interest Rate: At the close of business Wednesday (01/05/11), the 30-year Conforming rate finished at 4.90 percent. Note: this rate is with zero points and is for good credit quality borrowers. Those with lower credit scores are likely to encounter higher interest rates (example: 4.90%).
Loan Term (in years): The default setting here is 30. The most common loan term on the market these days is 30 years (example: 30).
Based on the examples we provided, below is the results of the amount of home you can afford (just as it is displayed by our calculator):
House value: $ 292568 Loan value: $ 272568 Monthly Principal+Interest: $ 1446.60 Monthly Prop Tax+Insurance: $ 653.40 Down Payment 6.84 %
NOTE: Your down payment is less than 20%, so you pay PMI.
(PMI = Private Mortgage Insurance.)
That’s an extra 0.5% of your loan each year
House value: $ 277248 Loan value: $ 257248 Monthly Principal+Interest: $ 1365.29 Monthly Prop Tax+Insurance: $ 619.19 Monthly PMI: $ 115.52 Down Payment 7.21 %
Don’t forget all those closing costs and points too!
HSH.com’s “How Much House Can I Afford” Calculator” is a great tool for homebuyers. This calculator is able to provide you with an accurate gauge of your affordability before you even begin to shop around.