Mortgage Payment Calculators: What to Consider

Posted on May 29 2017 - 5:28pm by Admin

Real estate agent talking to the clientsIf you are in the market for a new home, some tools can help you find out how much you can afford.  Some of the important factors are income, debts, and how much down payment you can afford.  A mortgage payment calculator is just the tool for you – it will help figure out monthly payments, the loan amount to apply for and the ideal purchase price.

What lenders consider

For many people in Utah, mortgage payment calculators are a great resource. They help a buyer get a better idea of what lenders are looking for when they consider a loan application. Lenders look at different things when they calculate how much they should offer as a loan.

Income-Debt ratio

Lenders look at how much you owe on credit cards and what other debt you have.  This gives them a good idea of how much you will have left for living expenses and how much you can afford on your mortgage. Items such as student loans, credit card payments, car loans and child support are expenses that have to be met on a monthly basis.

Back end ratio

This ratio includes all the debts owed. This ratio is best at 36% or lower. However, the ratio numbers used by lenders are not cast in stone. Applicants with higher ratios do get mortgages, but these loans fall under a different category.

Credit history

If you have a good credit history, you will get a low-interest rate which makes it affordable to take a higher loan. Borrowers with credit scores of 740 and above are considered for higher amounts.

Down payments

If an applicant can afford a down payment, the ideal percentage is 20%. This will get borrowers great loans with regular lenders. Those who can afford just 5% or 10% can apply for FHA loans and buy their homes.

Lifestyle

Even though a lender’s parameters are good to take into account, you should check how much you spend for your lifestyle. For instance, if you want to send your child to a private school, that is one expense that lenders don’t take into account. If you live in an area where you don’t need a car to get around, you will be eligible for a bigger loan.

As a borrower, you should be careful and give yourself some space. There may be unforeseen contingencies which require you to take out your savings. There is no need to spend everything you have.  Saving a part your income and using what you need, will help you stay comfortable financially.