Peter Van Brady
Founder of SoCal VA Homes
Author: Avoiding Mistakes & Crushing Your Deals Using Your VA Loan
Knowing how to use a mortgage rate calculator is tremendously helpful for first time home buyers. A mortgage rate calculator is useful for getting an estimate of your monthly mortgage payment and seeing what part of your monthly payments will go toward interest, taxes, and homeowner’s insurance. In this guide, we will walk you through the different steps that allow you to calculate your mortgage.
How to Use a Mortgage Rate Calculator
The information required for most mortgage rate calculators can appear a bit daunting. Here is the most basic formula, one that will only give a general estimate of your payments: the monthly mortgage payment (m) is equal to the principal amount (p) plus interest rate (i) divided by the number of payments (n) over the duration of the mortgage loan. It looks like this: m=p+i/n.
However, deciding how much home you can afford involves more than pinpointing a range of sticker prices on homes. The reality is that you will need to factor in other variables, like interest, local property taxes, and loan term rates. Fortunately, SoCal VA Homes has a mortgage rate calculator, and it isn’t difficult at all to use.
Required Information for a Mortgage Rate Calculator
You will be required to provide the following information when using the mortgage rate calculator.
Home Price
Enter the dollar amount of the home you expect to buy or the amount you think you would like to spend on a new home. You might want to enter different home prices into this field as you spend time using the calculator, to see how the results change and how you feel about those results.
Interest Rate
You will also be required to input the interest rate. The interest rate is the amount of money your lender charges to issue you the loan. Other than the cost of the home, your interest rate is the most significant factor that will affect the amount of your monthly loan payment. This is why getting the best possible interest loan rate is crucial. When preparing to buy a home, there are things you can do to get a lower interest rate, such as working with your realtor to determine if the seller of the home will pay for a rate buy-down.
Loan Program
Mortgage rate calculators require that you indicate the loan term, or the number of years until you will pay the mortgage off.
You will also enter the type of loan you plan to get, stating whether you plan to get a fixed-rate mortgage, adjustable-rate mortgage, or VA loan. A 30-year fixed-rate mortgage is the most common type that buyers get. But a homeowner might choose to get a 10- or 15-year loan if they are refinancing. Opting for a shorter-term will probably mean higher monthly payments. But paying the loan more quickly can decrease the total amount of interest paid over the life of the home loan. Another benefit of choosing a shorter term length, even paying off the loan in half the time, is that you will free up considerable resources sooner so that you can direct those funds elsewhere.
Down Payment
The signature feature of VA home loans is that down payments are not required unless the purchase price of your home is above loan limits. Keep in mind that utilizing a down payment can decrease the amount you will pay in your VA funding fee (LINK?) and your monthly mortgage payment. The adjustment will depend on the size of your down payment, should you choose this option.
Property Tax
Your county tax assessor assesses an annual tax on real property or real estate. This is the property tax, and depending on your loan program, lenders will require that you pay for your taxes through an escrow account. The upside for you, the homeowner, is that the lender makes the payments, which are split into two halves, on your behalf.
Pay attention to real estate price appreciation (or falling prices). This may be reflected in your tax assessment, but it may not. As of 2019, Proposition 13 limits the property tax increases to two percent, regardless of how fast your home might be appreciating. When property values have declined in the past, some homeowners have benefited from disputing the county tax assessment with a current appraisal. They have submitted the appraisal to the assessor’s office resulting in a lower property tax bill. If you permit an addition, adding square footage to your home, that will increase the property value and your tax bill.
Homeowners Insurance
Lenders require home owner’s insurance, so mortgage rate calculators will factor this information in when estimating your future mortgage payments. Home owner’s insurance will protect you and the lender in case of a major catastrophe if your home is severely affected or damaged. Monthly homeowner’s insurance can be set up to be paid from an escrow account, just like property taxes, and the bill is paid on your behalf.
Required Information for Veterans Home Loans
The SoCal VA Homes mortgage rate calculator requires that you indicate your military service branch if you have a service-related disability and if you have used a VA loan in the past. This information affects how much you will pay in a VA funding fee, a one-time fee that is paid to the Department of Veterans Affairs.
In most cases, you will need to incorporate all of the factors just described. After using the calculator, you might discover that a particular home in one neighborhood is not affordable for you. But you might be pleasantly surprised to find that you can comfortably afford a home you initially perceived as out of your price range. In addition to showing you the overall affordability of different scenarios, another added value of a mortgage rate calculator is that it shows you exactly where your money is going.
Contact Us Today!
Now that you’ve had a chance to read about how to use a mortgage rate calculator, we invite you to read our blog for more information on buying a home and using your VA home loan benefits. In addition to learning more about your future mortgage rate, you might find it helpful to read about first time home buyer loan qualifications. We have put together a very useful checklist for first-time homebuyers to reference as you move closer to homeownership.
If you can’t already tell, SoCal VA Homes is passionate about helping Veterans navigate the homebuying process, making sure that things go smoothly when you use those hard-earned VA benefits. Unfortunately, it’s very common for Veterans to face challenges when trying to buy a home with a VA loan. We are very prepared to confront those challenges with you!
Our team at SoCal VA Homes has developed three unique programs to give Veterans an advantage when buying or building a home. Our Veteran’s Angel Program utilizes three stealth-like tactics, strategies so effective that this program has become a favorite among our clients. You can build a new home for zero down and zero closing costs with our second program, the 100% VA Construction Loan. A third option is our Dreamweaver Home Purchase Process, a program that lets you buy a fully custom renovated home with zero down and zero closing costs.
If you are still wondering exactly how to use a mortgage rate calculator, we would be very happy to walk you through the process! Just give us a call at 949-268-7742 or send us a message. If you’re ready to move forward to buy your first home, contact SoCal VA Homes today!
