Buying a house means spending a lot of money
Many people are not able to bear this cost on their own, that why they need mortgages. But getting a mortgage is not as easy or stress-free as it sounds. There are stringent rules to follow and some important questions to answer. The most important one being; how much of a house can I afford?
The reason why this question is important
Because you do not want to be in a situation where the amount of loan you borrowed far outweighs what you can realistically bear. This is what leads to foreclosure. You can simply avoid this dilemma by knowing what you can afford before searching for homes.
Nowadays it is easy to know this with a mortgage calculator
Instead of using pen and paper and taking your pay stubs to the bank, the mortgage calculator makes mortgage calculation easy. All you need to do is put in your PMI (private mortgage insurance), taxes, home insurance and other fees and you have an accurate monthly mortgage estimate.
The two types of insurance, which form part of the mortgage calculation are crucial as they ascertain the lender and the borrower of the money are shielded from unexpected circumstances. While PMI benefits the lender of the money, homeowners insurance bulwarks the borrower in case of minor or major damage to the property. PMI, however, only needs to be paid until the loan balance drops below 78%.
HOA fees (Homeowners Association Fees) are also included in the mortgage calculator
They are paid by homeowners for sundries purposes such as maintenance of shared things (e.g. elevators, hallways, etc.). The amount of such fees varies from building to building and from neighborhood to neighborhood.
One more information that will be put in the mortgage calculator
The EIR or Effective Interest Rate, which the lender charges for lending you money. This helps you acquire a deduction on your monthly mortgage fee for the lifetime of the loan. Many times, your choice of lender will be determined by how much they charge as EIR. Choosing the right lender, offering a good EIR rate can help you pay up your loan faster.
Annuity loan can be paid either monthly, semi-monthly, bi-weekly (every fourteen days) or weekly
The more regularly you pay it, the more interest you will put away and for that reason spend less overall. You can make use of the mortgage calculator with PMI and taxes, found here, to ascertain how much you can really afford on a mortgage before looking at houses. Careful preparation will help you avoid the common real estate buying mistakes.