In the not so distant past, when the Internet was not yet popular and technology was still in its infancy, buying a home involved going around town on foot, knocking on the banks’ doors for a possible loan, and personally negotiating the terms of the loan.
The borrower and the creditor’s representatives would meet and discuss the terms of the mortgage, armed with pen, paper, and the good old-fashioned calculator in crunching numbers and the amounts of money involved. To say getting a mortgage in the past was daunting is an understatement.
The slow, tortuous, and agonizing process of getting a home loan in the past has radically changed in the past few years because of the proliferation of Internet use and the availability of an online mortgage application and tools that became available at everybody’s fingertips.
Instead of scouring the town for possible creditors, all you need to do now is type your query on a search engine and you will have hundreds of good referrals. Instead of bugging a busy bank’s representative on whether you may qualify for a home loan or not, you can find out the answer, again, with an online query.
All questions you have about getting a home loan or refinance, from the requirements to the interest rate, can all be accessed without leaving the comfort of your home. If you have access to a personal computer, mobile device, and an Internet connection, you will be able to learn everything you need before you even start looking for a house you want to purchase.
Mortgage Tools and Calculators
Mortgage tools make navigating your finances as you apply for a home loan or refinance easy and systematic. Creating a budget while taking into consideration your home mortgage monthly payments, and other payables could get complicated.
It is difficult to not get lost in the loan process. Using mortgage tools and the lender’s loan resources can help you, as the loan applicant, get a better understanding of where you stand and if it is advisable that you proceed to the next steps.
The use of mortgage calculators can estimate your mortgage payment, including taxes and insurance. Several mortgage calculators are available online, which anybody can use in figuring out if they can afford a home mortgage or refinance.
The following are some of the widely used mortgage calculators:
- Affordability calculator – This calculator will determine the cost of the house your current finances can afford. Entering your current income, down payment, and monthly financial obligations will result in an estimate of the mortgage amount that will work best with your budget.
- Pre-qualification calculator – This mortgage pre-qualification calculator can calculate whether or not you will qualify for a home loan. If you can qualify, it will also determine how much of a loan you might qualify for.
- Debt-to-income calculator – This calculator will help you in determining your debt-to-income ratio and if it will qualify for a mortgage. If you intend to get a conventional loan, lenders will generally look for a maximum 36% debt-to-income ratio while FHA loans allow up to 41% of income-to-debt ratio.
- Mortgage payment calculator – This is a tool to determine your estimated mortgage payment. The calculator will determine the impact of insurance and taxes on your total monthly mortgage payment. This gives you a clear picture of whether you can afford the home loan or not.
- Refinance calculator – This calculator will determine the advisability of refinancing your existing mortgage. The calculator will estimate the amount of money you could save by refinancing by making a comparison of your current home loan with a refinanced loan with new rates, terms, and other factors taken into consideration.
- Interest rate calculator – If you have your misgivings about the interest rate your lender is charging you, the way to find out the amount of interest rate you are paying can be determined by using an interest rate calculator based on the Newton-Raphson method of calculating interests. All you need to do is enter the amount of your principal loan, the exact amount you are paying monthly, and the number of months the loan will run. The tool will give you the rate of interest you are charged for your loan.
- Property tax calculator – Property taxes vary by state, as each state has its percentage of tax levied on properties. Most states compute the property tax based on a particular percentage of the assessed value of the property, not its market value. The calculation considers the assessed value of the property, the tax rate, the annual rate of increase, and the number of years you want to calculate the total amount of tax.
- Home insurance calculator – Home insurance provides protection to your home, damages to the home, personal liability, your valuables, guest medical expenses, and much more. The amount of home insurance you need will depend on your specific situation, such as the value of rebuilding your home, the worth of the valuables you keep in your home, your personal liability in the event you get sued, and many other factors. The best way to calculate your home insurance is to have a consultation with a representative of Cato Home Loans who will help you determine the kind of coverage you will need for your home.
- Down payment calculator – This calculator will determine the upper limit of the home price you could buy, including the related costs after you determine the amount of down payment you are willing to put up.
- Mortgage payoff calculator – The mortgage payoff calculator determines how much interest you can save by increasing your monthly mortgage payment. You will be able learn the number of years that will be cut from your loan based on the specific amount you will add to your monthly payment.
- ARM vs. fixed rate calculator – Adjustable rate mortgage is a mortgage with interest rate adjusted based on an index reflecting the cost to the lender of borrowing on the credit markets. Adjustable rate mortgage has a generally lower interest rate, which may fluctuate depending on market conditions. Fixed rate mortgage has fixed interest rate that will run through the duration of the loan. The ARM vs. Fixed-Rate Mortgage calculator compares the monthly mortgage payments for each loan type.
Benefits of Using Mortgage Tools and Calculators
The use of different mortgage tools and calculators will show you where you stand with regards to your plan to purchase a home, your mortgage application, and your ability to pay off your mortgage. Getting a home is a complicated process made a lot easier by using the different tools available to you online or through your local home loan company. The different tools at your disposal will educate you on the intricacies of home buying and will give you an idea of the advisability of getting a home right now, based on your financial position.