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This mortgage calculator can be used to figure out monthly payments of a home mortgage loan, based on the home's sale price, the term of the loan desired, buyer's down payment percentage, and the loan's interest rate. This calculator factors in PMI (Private Mortgage Insurance) for loans where less than 20% is put as a down payment. Also taken into consideration are the town property taxes, and their effect on the total monthly mortgage payment.
The wonderful world of home buying can sometimes overwhelm the
first time homebuyer. They are inundated with information
riddled with terms of art. ARMS, points, interest rates, good
faith estimates, pay-downs, lock-in dates, so on and so forth.
Though some or all of these terms may seem somewhat foreign to
you, do not get overwhelmed, there are simple explanations for
each and every one of them.
Let us start with the different types of loans there are.
Typically all home loans fall into two basic categories:
mortgages and home equity loans. Mortgages are simply a loan
against property that is secured with a "mortgage". This
"mortgage" is basically a lien against the property until such
time that loan is satisfied. So a mortgage is a loan against
property that is secured with a lien against it.
A home equity loan is a loan that is also secured with a lien
against the property. The home equity loan lien is secondary to
the first mortgage on the home. This type of loan is based on
the amount of equity in the house. Equity is the difference in
dollars between the value of the home and the amount owed on it.
Equity can be a positive number (the house is worth more than
what is owed) or can be a negative number (negative equity)
which means that there is more owed on the house than the house
is worth.
A lien is simply a legal term that indicates that someone other
than the homeowner has a legal right and interest in the
property. So, if the property is ever sold, all liens need to be
satisfied - any money owed to anyone with a lien must be paid,
otherwise the new owner may become obligated to pay the amount
owed. A lien is against property, not a person. Typically in all
real estate transactions there will be a title search that will
reveal any liens against the property. This title search is
basically an examination over anyone and anything that may have
some legal interest, obligation or right to the property.
If there are multiple home loans on a property the order they
are paid in is the oldest to the newest. This is only a factor
if the property is being sold for below what is owed. This is
either through a "short sale" where the house is being sold by
the homeowner for below the amount that is owed in the house.
They will need approval from all lien holders in order to do
this. This is also an issue if a house falls into foreclosure.
Within these two types of loans you will want to know the
difference between a fixed-rate mortgage and a variable rate
mortgage. A variable or adjustable rate mortgage is an ARM.
Fixed-rate mortgages have the same interest rate from the first
day of the loan to the last day of the loan unless it is
refinanced. A fixed rate or variable rate loan will generally
start off for a period of time at a specified rate and then
after that period ends, if the loan has not been paid off or
refinanced then the rate becomes adjustable based on specific
conditions set forth in advance - typically tied to the federal
interest rate. An ARM loan will have typically a 3 or 5 year
period during which the rate is lower than the going rate. This
is used to entice would-be borrowers or help borrowers have
lower payments for the initial period.
"Points" are often discussed in connection with loan packages
and interest rates. You can "pay down" an interest rate by
paying points for example. What this means is you can pay for a
lower interest rate if you pay a specified number of points.
Points are simply one percent of the loan amount. So a $100,000
loan equates to $1000 for every point.
Another term you will often here is PMI, private mortgage
insurance. PMI is insurance for your lender when the amount you
borrow is more than 80% of the value of the property. In these
cases the borrower needs to pay for this insurance policy. The
calculation for your monthly PMI payment is 0.5% of your loan
amount divided by twelve.
Tied to the calculation of PMI, as well as many other factors of
the loan is an appraisal. An appraisal is a determination by a
real estate professional of what the value of the property is.
They will evaluate the property and similar properties in the
area. They will consider market trends, recent sales and other
factors to give an estimate on what the property is worth and
would sell for.
Another potential add-on to your monthly payments is escrow
payments. Escrow is money that is being held typically to pay
taxes. Your lender will collect 1/12 of your yearly taxes every
month in order to be assured that your taxes are paid. Your
lender then makes your required tax payments. Typically your
lender will have a cushion in the escrow account of 2 - 3 months
in case you fall behind in your payments.
Though there are many more terms you may encounter these are the
most often used, misunderstood terms. During the home loan
process, however, you should never feel embarrassed or ashamed
to ask what a term means. The more you know the better off you
will be.
About the author:
Max Hunter is the author of many credit related articles. If you
are looking for help with Home Loans or any type of credit issue
please visit us at http://www.homeloanave.com