Published August 7, 2020

If you need to finance your home purchase, you're not alone. The National Association of Realtors reported in 2019 that 88 percent of buyers sought financing to buy their home. For this reason, one of the most critical aspects of the buying process is understanding how much mortgage you'll qualify for and if your terms make the most financial sense. An online mortgage calculator can help you start answering these questions.

What is a mortgage calculator?

A wide range of lenders and real estate professionals offer mortgage calculators that estimate a monthly mortgage payment. A basic calculator will ask for the home's price, down payment, loan term, and interest rate to determine this figure. More sophisticated tools have additional mortgage calculator features helpful for the home buying or refinancing process. 

Mortgage calculators help homebuyers make important financial decisions like:

How much home can you afford?

The fundamental question prospective home buyers should answer first is, "can I afford a home?" A Rent vs Buy Calculator can show the costs of renting or buying a home. Other mortgage calculators factor your income and down payment funds. Our Mortgage Loan Calculator gives a potential figure of how much you could spend on a monthly payment based on different interest rates and loan amounts.

Dig deeper by using an advanced mortgage calculator that factors in your debt-to-income ratio (DTI). This figure is how much of your monthly income goes towards paying off other loans, like student or auto. Lenders weigh the DTI when determining if the borrower is high or low risk. For most programs, the highest ratio someone can have and receive a Qualified Mortgage is 43 percent.

The mortgage calculator with this feature uses your DTI, annual income, estimated down payment, and zip code to estimate how much house you can afford.

What's the right mortgage option?

Typical mortgage programs offer 15-year and 30-year terms. Borrowers can also choose a fixed interest rate or an adjustable-rate mortgage (ARM). A mortgage calculator enables you to run different payment scenarios with the loan term limits and current estimated interest rates. See our Mortgage Comparison Calculator to play around with these terms.

What impact will interest rates have on my home purchase?

Mortgage calculators show the impact of good or bad credit on your interest rate. Homebuyers can increase their chances of receiving the right rate by lowering their DTI and improving their credit score. By plugging in different figures, see how small percentage points lead to saving thousands of dollars over the long-term. The calculator may show it's worth waiting on the home purchase to improve your DTI and credit score to get better mortgage terms and a lower monthly payment.

Where does my mortgage payment go?

First time home buyers need to know their housing costs are more than principal and interest. Smart calculators tabulate local Austin, TX property taxes and homeowner's insurance rates to show a more precise monthly payment. Some factor in homeowner's association fees. These mortgage calculators give the payment breakdown to demonstrate where the monthly payments are going.

Knowing your full principal, interest, taxes, and insurance (PITI) rates plus HOA fees also impacts how much home you can afford. If you estimate a monthly payment of $1300 using just principal and interest, paying taxes, insurance, and an HOA on top of that could cause financial strain.

What should I ask a loan officer?

Playing around with a mortgage calculator allows you to be confident when meeting with a loan officer about what kind of loan terms you want and what you should qualify for. You'll know to ask the loan officer about which loan makes sense for your home purchase, any special programs, and how much down payment is required.

Besides the loan amount and interest, most mortgages come with fees. A Mortgage APR Calculator helps you see how these fees impact your APR. Ask the loan officer about their fees so you can calculate these into the costs. You'll understand if the terms and interest rate they can offer you makes financial sense.

Should I make extra payments?

Some mortgage calculators demonstrate how much you'll save over the life of the loan by paying down principal early. These calculators allow you to see how small monthly payments or lump-sum payments impact your loan. In addition to interest saved, they'll give a new prediction on the payoff date.

Does refinancing make sense?

Current interest rates are historically low. Refinancing could be an attractive option for some homeowners. A refinancing interest savings calculator demonstrates what you'll save in the long-term by refinancing to a lower interest rate.

Using a mortgage calculator

Mortgage calculators are beneficial educational tools for home buyers and owners. We offer a range of calculators in our Tools section. Our Big Life Home Group mortgage calculators have features like tax savings and mortgage points to help Texas homeowners with their mortgage and home buying research.

Purchase your home with the confidence you are making a smart financial decision. Contact us to chat about your financing needs.

For educational purposes only. Please contact your qualified professional for specific guidance. Not a commitment to lend. Borrower must meet qualification criteria.