Mortgage Calculator With Taxes and Insurance
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A mortgage calculator with taxes and insurance is an invaluable tool when you’re on your homebuying journey. It will help you determine the monthly cost of owning a house, factoring in not only mortgage payments but also taxes and insurance. As with any financial tool, the more information you have, the more accurate the results. Let’s look at what a mortgage calculator with insurance and taxes is, the pros and cons of using one, and other things that may affect your budget for a new home.
A mortgage calculator with insurance and taxes is a financial tool that enables future homebuyers to estimate their monthly payment on a home mortgage loan with property taxes and insurance factored in. Some mortgage calculators only look at the loan principal, the interest rate, and allow users to compute the cost difference between a 15 vs. 30 year mortgage. However, as we discuss below, this won’t give prospective buyers the full picture of their costs. To get an accurate estimate, you need a mortgage calculator that factors in taxes, insurance, and PMI (private mortgage insurance, which some buyers are required to purchase).
Including just the interest and principal in a mortgage calculator is only part of the equation. Other factors can greatly influence how much you’ll pay each month with a certain house. These include:
• Property taxes: Lenders often require borrowers to pay a portion of property taxes each month with their monthly payment.
• Property insurance: Lenders require homeowners to purchase home insurance to protect both themselves and the lender. Depending on where you’re buying, you may also need earthquake or flood insurance.
• Mortgage insurance: Mortgage insurance is needed when your down payment is below a certain threshold. With conventional loans, 20% is the magic number.
• HOA fees: While they’re not typically paid with the mortgage, homeowners association fees are a cost of homeownership and it’s helpful to factor them in when you think about your budget.
A down payment is the portion of a home purchase that is not financed. How much is a down payment? Different types of loans require different amounts. A government-backed loan, such as one backed by the Federal Housing Administration (FHA), may require a 3.5% down payment. A conventional mortgage loan can come with a down payment amount as low as 3% of the home price.
As noted above, borrowers who put down less than 20% typically have to also pay for private mortgage insurance (PMI) which covers the lender in case of default. (Jumbo mortgage loans can require a 10% to 20% down payment; these loans are usually for homes that exceed $726,200, or $1,089,300 in higher-priced counties.)
The national average down payment was $34,248 in the second quarter of 2023. Don’t forget that at the closing, you’ll also have to pay homebuying closing costs, including a loan origination fee, which is usually about 1% of the loan amount.
To lower the down payment on a home purchase, there are a few strategies you may be able to implement. The most effective way to lower your down payment, of course, is to buy a cheaper house. (Try using a home affordability calculator to see how much house your budget can comfortably handle.) Other options you may have include:
• Choosing a different loan type: Some loans require higher down payments than others. If you can qualify for a conventional loan, a lender may agree to a 3% down payment. Plus USDA and VA loans don’t require down payments at all. If you are new to the homebuying process, seek out a home loan help center to learn more.
• Down payment assistance: Some down payment assistance programs are loans while others are grants. If this is part of your strategy, you’ll want to apply well before you start house hunting.
• Take care of your credit score: If you’re considered more of a risk to the lender because of a low credit score, paying attention to your score and making necessary payments on time may help you qualify for a lower down payment. It may also help you get a good mortgage rate.
• Ask for help with closing from the seller: Getting help with closing costs from the seller won’t reduce your down payment amount, but you will need less money at closing.
A mortgage payment calculator with taxes and insurance comes with both benefits and drawbacks. Before you use one, it’s important that you understand the tool you’re using so you don’t get ahead of yourself.
Pros:
• Helps homebuyers get an estimate on monthly cost: When you’re first starting off, you may not even know how much house you can afford. A calculator can help you establish a range — especially a mortgage calculator with taxes and insurance.
• Aids in budgeting and planning: When used properly well in advance, a mortgage calculator can help you prepare for the true cost of buying a home.
• Can help you decide between houses: If you love multiple houses and don’t know which one to make an offer on, a mortgage calculator may help you narrow down the best financial choice for you.
Cons:
• Does not account for preapproval: While you may be able to afford a down payment for a certain price tier, this does not mean a bank will loan you the amount you need. To truly understand what houses you would be able to put an offer on, you need to speak with a mortgage lender.
• Your property taxes may increase: Property taxes can go up over time as home values rise and local governments do periodic reassessments.
• You may need earthquake or flood insurance: Both policies, if needed, can add quite a bit to your expenses.
As discussed, down payment assistance programs do exist, but they should be a part of your strategy from the beginning long before you make an offer. Lastly, before you apply for a mortgage, work on your credit score. A higher credit score may help you qualify for a mortgage with a lower down payment requirement.
Use a mortgage calculator with taxes and insurance to get an accurate estimate of how much you’d spend each month on your mortgage, property taxes, and insurance. Try plugging in different combinations of home price and down payment amount to get a sense of how changing these factors would impact your monthly payments.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.As of August 2023, the average mortgage payment in the U.S. is $2,234. Most data sources do not include taxes and insurance with their calculations, which is why a mortgage calculator with taxes and insurance is a helpful tool to use when buying a home.
A common rule of thumb is that you should spend no more than 28% of your gross monthly income on your mortgage payment, insurance, and other housing costs. Much more than this, and you may feel stretched too thin in other areas of your life.
Probably. While it depends on your income and other assets, most homebuyers will find 50% too much to spend on a mortgage. And many lenders simply won’t approve a mortgage that takes up this much of a buyer’s income.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.SOHL1023245