Why a Calculator Isn't Helpful

She was very surprised when I told her the monthly payment would be $1127 per month. “But my Realtor told me the payment would be only $925!” The Realtor was using a mortgage calculator to estimate the payment based on the price, but the answer you get is only as good as the data you put in.

It’s pretty easy to find a loan payment using a web calculator. Most loans are fully amortizing, so if you have 30 equal payments at 4.0% on $193,751, the only correct answer is $925 in monthly principal and interest payments.

But you’re not only paying principal and interest. Mortgage payments include other parts of your housing expense, as well.

Even if you ballpark an interest rate, does your loan require a funding fee? Some government loan types charge a one-time funding fee at closing that increases your loan amount. If you miss this feature, your data input and resulting calculation will be off.

Too, there could be mortgage insurance required for the loan program. Factors vary all over the place on PMI costs. And some loans with lower down payments tuck PMI into the rate or closing costs instead of charging a monthly fee.

Homeowner insurance rates can vary greatly, depending on where your home is located. The mortgage qualifying calculators often base the insurance on a factor of the price. For larger properties or those outside of town, this number can be too conservative.

Are there home owner association fees? Or extra property tax assessments? Even if these costs are annual expenses, it’s helpful to know exactly what the amounts are for budgeting purposes.

Your best monthly payment information comes from an experienced mortgage professional. Making the time to work a loan pre-approval before you shop remains the best way to be certain you are shopping for a home in the price range that nets a monthly payment you can afford. Doing it yourself seems nice, but your mortgage is a long term liability better approached with the guidance of a seasoned mortgage advisor.