Finding the right mortgage involves a lot of math. It seems simple at first, but it gets complicated as you discover different loan scenarios that apply to your unique situation.
To crunch the numbers correctly, you ought to give your undivided attention to every potential deal and pick the most financially sensible offer. Those that don’t exercise due diligence tend to make these mistakes:
Ignoring Interest Impact
Using a mortgage payment calculator in Utah, Colorado, or Arizona helps you plan your budget, but don’t lose sight of the big picture. Professionals at American Loans note that many borrowers are guilty of trying to bring their monthly housing cost down instead of making the overall loan affordable.
Remember: the real cost of a mortgage is its interest. Avoid lengthening the term just for the sake of lowering your monthly payment. The more time you need to pay off your home loan, the greater the interest can hurt your pocket.
Think about different ways to minimize your interest. The usual strategy is to borrow less money or keep your term as short as possible. Some lenders let you buy your mortgage down to get a better rate in exchange for paying more dollars up front.
Focusing Too Much on Mortgage Amortization
The mortgage amortization schedule would show you which portions of your payment would go toward the balance and interest. However, don’t forget about property taxes, insurance premiums, and even HOA dues. Factor these charges into the equation to determine your monthly housing expenses realistically.
Underestimating Closing Costs
Closing costs, non-recurring ones to be specific, are one-time fees incurred during the real estate sale transaction. Depending on the result of the negotiation, they can be shouldered by the seller, buyer, or lender.
If you’re obliged to pay them, you have to set aside up to 5% of the purchase price. The law requires lenders to advise you about them in a good faith estimate within three days of your mortgage application. Explore options to reduce or eliminate them to prevent them from affecting your finances big time.
A mortgage is a major financial commitment with long-term implications. Do the math properly because a single miscalculation could put your and family’s future in jeopardy.