In this calculator, you need to enter your best guess at the monthly costs for property tax, home owners insurance, private mortgage insurance (PMI), homeowners' association (HOA) fees, and other expenses that you and/or your lender want to consider as part of your total "housing expense payment." If you pay off your loan, YOU will be responsible to continue paying the tax and insurance. Side note: The company that services your loan will hold the tax and insurance portion of your payment in escrow and pay those bills when they come due. In steps 3 and 4 we need to calculate the PI portion of the payment so that we can calculate the maximum loan amount. The PI payment is just the Principal and Interest portion. PITI stands for Principal + Interest + Taxes + Insurance. When we talk about a "mortgage payment" we are often talking about the full PITI payment. Key to Understanding: Find the Minimum of the Maximums So, we'll step through how this calculator works in detail, but you should also do more research to learn about the other factors involved in home buying. Some tools like this calculator can help simplify and explain things, but ultimately you need to consider all the different factors when making such a huge financial decision. How This Calculator Worksīuying a home IS complicated. Update : Fixed the formula in cell F31 that was making the Pie chart double-count the fixed closing costs. In addition to what the lender might be willing to give you, you should also evaluate your budget using something like our family budget planner to figure out if you can afford the monthly housing payment that these types of affordability calculators report. This calculator should only be used for educational purposes and definitely NOT as financial advice. IMPORTANT: People commonly use calculators like this to purchase the largest house they can, but that is often a big mistake.
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