So how much do you want to pay?
December 10, 2013 7:07 PM   Subscribe

We are shopping for a new home. We think we have found a home we want to put an offer on. The thing is, we have no clue how much the mortgage payments will be. We know the taxes and insurance, but there are so many online calculators giving us very different numbers for the monthly payment.

We plan on going FHA with 3.5% down, fixed APR, 30 yr. We have enough in the bank for 5% down, great credit and acceptable LTV, to maybe consider a conventional loan with PMI, but then we would have to borrow from family for closing costs.

I have calls out to potential lenders (including our current mortgage holder) to get rough quotes on monthly payments, but they don't seem too quick to get back to me.

Have any of you used an online calculator/ formula/ some hack, to determine mortgage payments?

We know we can afford the house, the question for us is, do the payments fall in our comfort/ acceptable zone.
posted by MayNicholas to Home & Garden (21 answers total)
 
You say "fixed APR", but the big missing factor here is exactly what that APR is. That's what you need to know to get the correct number.
posted by Sequence at 7:09 PM on December 10, 2013 [3 favorites]


There's no trick to it, all of the calculators for loan payoffs can figure out an amortization schedule. There are only three numbers that matter for this:

1) The amount of the mortgage. Not the value of the house, the amount that you borrow.
2) The interest rate of the loan.
3) The length of the loan term.

If you know all these things, you'll get the monthly mortgage payment out of any of these calculators.

*BUT*

There are a couple other things besides the mortgage you'll have to pay:

1) Homeowner's insurance.
2) Mortgage insurance (iff you're putting down less than 20%).
3) Taxes.

My mortgage payment breaks down like this:

Principal & Interest     $2,520.79
Homeowner's Insurance(s) $  122.33
MIP Mortgage Insurance   $  495.16
County Tax               $  503.97
Scheduled Payment        $3,642.25
Which is to say that the amount of money I pay every month is 44% more than my "mortgage payment".
posted by tylerkaraszewski at 7:15 PM on December 10, 2013 [4 favorites]


For what it's worth, you can make an offer and ask the seller to add in money for closing costs. Let's say the house is 150k, and closing costs are 2500. You can offer 152500 and ask for 2500 towards closing costs. Or you can offer 150k with 2500 towards closing. Or 148k with 2000 towards closing. It's totally up to you, and it's a nice way to get the closing costs taken care of without scrambling around for cash.
posted by Slinga at 7:21 PM on December 10, 2013


Could you provide the numbers you're using so that we can give you a better answer? I've used online mortgage calculators a number of times and never found any significant discrepancy between them.
posted by treehorn+bunny at 7:25 PM on December 10, 2013


We know the taxes and what our home insurance would be. That part is easy. We are trying to figure out the mortgage payments with the PMI. I am getting numbers from various online calculators that vary from 'Ooh that's perfect!' to 'Holy crap we can never afford to buy a house again!'.

We don't plan to ask for closing costs. The list price is about 7k above market. We plan to offer 10k below list and hope to settle at 7k below list (of course less would be awesome, but not optimistic). I doubt they would be willing to do closing in such a narrow margin. But, maybe we could try it in a counter.

The final number we are hoping for is 179K. Home owners is $425/ annually and taxes are $2015.
posted by MayNicholas at 7:29 PM on December 10, 2013


PMI is going to be *roughly* 1% of the home value annually. The principal and interest is easy, all the online calculators will do it.
posted by tylerkaraszewski at 7:31 PM on December 10, 2013


What is the APR?
posted by MoonOrb at 7:48 PM on December 10, 2013


When we recently bought our house, we worked closely with our mortgage broker to line up the financing and know exactly what the payments would be before we made the offer, including all the variables - and then we assumed that it would, in reality, end up being a bit more than what they said. We were not surprised.
posted by The World Famous at 7:49 PM on December 10, 2013


I never could find a good calculator for an FHA loan, but I did use this site to calculate it out by hand. They keep up to date on the new requirements/fees.

Couple things to note when considering your costs with an FHA loan:
1) your closing costs are much higher than a conventional mortgage due to the up front premium requirement. The formula is on the above linked site. Keep in mind that you have additional inspection/assessment requirements as well for the FHA loan.
2) you can't get an FHA loan if you already have one. A new mortgage on a second home can be FHA as long as it's your primary residence and your first mortgage is conventional.
3) FHA is now requiring that you pay 11 years of mortgage insurance, which can only be cancelled if your loan balance to original loan amount (not home value) is less than 78%. This was previously a five year requirement, so it's worth noting. You can refinance your way out of it, but that can be hard to do.

Finally, I don't know if this is regional, but in my area, sellers don't really consider offers from buyers who aren't pre-approved. The pre-approval is submitted with the offer letter (generally for the exact amount you are offering).
posted by smalls at 7:50 PM on December 10, 2013


If you want a quick estimate, go to bankrate.com and find out what mortgages might be available to you. Be sure to enter how much you are borrowing (not value of the house) and the proper state and city. It will show you potential mortgages that are being offered in your area, along with the monthly mortgage payment. (Just mortgage, not PMI etc.) Depending on your situation, you may be able to find a better rate with a mortgage broker or, if your credit situation is less than perfect, you may not be eligible for the very best rate but this will give you a better ballpark.
posted by metahawk at 8:00 PM on December 10, 2013


I spoke with our current mortgage holder and he said right now the APR is 4.25. That could change. We have been pre- qualified (not formal pre-approval) for waaay more than what we want to pay, with our current mortgage holder. Our house that we are selling is under contract, so by the time we would make it to close on new house our old FHA mortgage would be closed out.
posted by MayNicholas at 8:04 PM on December 10, 2013


If you don't have the APR locked in, it's impossible to know what your payments will be once you actually get the financing, since you don't know what the APR will be. What you can do, though, is nail down the lender on what all the variables will be, all the taxes, all the PMI and whatnot that will apply and get all that in writing so that you can have a better idea of the range of possibilities. You can also sometimes lock in an APR when you get formal pre-approval. That's a gamble, obviously, since rates could (and likely will) go either up or down between when you lock it in and when you actually get the loan.
posted by The World Famous at 8:21 PM on December 10, 2013 [1 favorite]


$172,735 is your mortgage amount, that's $179,000 minus 3.5% down payment.

According to bankrate.com that is an $849.75 per month payment.

Using MLCalc with your numbers (the 3.5% down payment) I'm getting $1053/month. If you click below the number on "click here to show the calculations" you will see this represents $849.75 per month in mortgage payment, plus $167.92 property tax, plus $35.42 property insurance, and they've automatically added in a $74.85 PMI (using a default number since I did not specify this).

I suspect the reason why you're getting different numbers is because some of the calculators are adding in the additional costs of tax, insurance, etc. and some are not. If you do the 3.5% down payment and get 4.25% APR, I believe the mortgage itself should be $849.75 and that should not vary.
posted by treehorn+bunny at 8:49 PM on December 10, 2013 [5 favorites]


Using MLCalc with your numbers (the 3.5% down payment) I'm getting $1053/month... they've automatically added in a $74.85 PMI (using a default number since I did not specify this).

Since you're planning on getting an FHA loan, mortgage insurance will actually be 1.35%, or $194.33. This is for the life of the loan; that is, you'll be paying an extra 1.35% in mortgage insurance for as long as you have your mortgage. With (non-FHA) PMI, you could stop paying mortgage insurance after you've gained equity in your house in a few years; with an FHA loan with a down payment of 3.5%, you have to pay that extra 1.35% for the life of the loan. The only way to escape is to refinance/pay off the entire loan.

By going with FHA, you're effectively adding 1.35% to your 4.25% APR, for an APR of 5.6% - costing you an extra $2300 per year. If you can possibly avoid getting an FHA loan, do so.
posted by mistersix at 10:38 PM on December 10, 2013 [2 favorites]


For an FHA loan, your mortgage amount will likely be higher than the loan amount less the down payment UNLESS you plan on covering those up front costs as part of your downpayment. The conventional calculators won't include this.

Check my link above for the details. Your up front insurance (due at signing or rolled into your loan) is going to be 1.75% of your base loan amount.

Your MIP is 135 basis points, which is going to be an extra 1.35% of your loan value (so $135 per 100k loan amount per year). Conventional calculators will all be low here, treehorn+bunny's looks to be off by more than half.

As far as interest rates go, FHA loan rates go strictly be credit score. I believe the cutoff for the prime rate is 740, but this may have changed. Locking in your rate is key to knowing what your payment will be; this should happen with your pre-approval.
posted by smalls at 10:42 PM on December 10, 2013


Thank you for the replies so far!

I know we have a good/ great credit score. Would it be better if we use the money we have for a down payment and borrow/ negotiate closing costs so we can try for a conventional loan?
posted by MayNicholas at 4:34 AM on December 11, 2013


Here is Fannie Mae's Mortgage Calculator


If you have to borrow money for closings costs, you can't afford to be a homeowner. There are closings costs with an FHA loan, you may just be able to roll them into the mortgage. Closing is about 1.5% of the total price. So factor that in. There are some closing costs that can't be rolled in, so be prepared to come to the table with some cash.

If you're only putting 3.5% down, you can't afford to be a homeowner.

If you don't have $10,000 in a "shit gonna break" fund, then you can't afford to be a homeowner.

There are also other costs outside of the traditional ones, that you must pay as a homeowner, gutter cleaning, landscaping, HVAC maintenance, Pest Control etc. Our monthly "money paid to others" related to housing costs was about $250.

Here's the thing, houses do not save you money. They are black holes for money. I was a homeowner for 20 years, and thankfully, I'm now a renter.

Your mortgage broker's job is to get you in a house, so he/she is going to do whatever it takes to get you in that house.

One end-run around PMI was to do a traditional mortgage for 80% and a second-mortgage for 20% of the house. You might pay a bit more on the second, but typically not more than PMI. Also, the interest on the loans was deductable. I'm not sure this is going to fly anymore, but things are getting weird again, so it just may.

As for taxes, that's last year's taxes. Many counties adjusted downward during the housing crisis, and now that things are on the upswing again, the taxes may be significantly higher (ours went up 50% for the upcoming year!) You need to get with the county assessor to determine what the taxes for 2014 are scheduled to be.

Lots of natural disasters mean that your Homeoweners insurance may go up.

You need to budget for about $100 to $200 differences in escrow stuff annually. Some years you pay more, some you pay less, but I've never had a year where it didn't change.

If your budget is such that a couple of hundred dollars is a make or break situation, then I really urge you to reconsider being a homeowner.

I made hay while the sun shone, but selling my house in Nashville at cost and losing money on our house sale here in Atlanta...after spending about $60,000 on bullshit that isn't cute in the least...well, I'm rather sour on the whole thing!

If you still insist on buying a house, then I suggest you get the BEST home inspector you can find. Get the guy to stick a camera into the plumbing (I'm not kidding) it will cost an extra $200 but you'll thank me if you have a sewer pipe replacement in the offing.

If the HVAC is older than 15 years, it will need to be replaced in the next few years. Do you have $10,000 to do that? If the roof is older than 20 years, ditto. How up to date is the electrical panel? We had to replace ours. That was a non-sexy $2,000. We did get a new hot water heater practically for free due to rebates, but replacing a water heater isn't exactly fun.

The older the house the more expensive it will be!

An inspection is not just to alert you to existing problems, it is also a predictor of when things will need to be replaced. And things will eventually need to be replaced.

Make the seller buy you a 1 year warranty on the mechanical stuff in the house. It's not great, but it's better than nothing. And it's not YOUR money.

But I do suggest you wait a year, save up more and perhaps reconsider the whole buying thing. Here's an article that I thought summed it up nicely.
posted by Ruthless Bunny at 5:59 AM on December 11, 2013 [1 favorite]


Ruthless Bunny: "
If you have to borrow money for closings costs, you can't afford to be a homeowner.
If you're only putting 3.5% down, you can't afford to be a homeowner.
If you don't have $10,000 in a "shit gonna break" fund, then you can't afford to be a homeowner.
"

This is ridiculous. We had an FHA loan and wrote a check for $137 at close. That was our total cash outlay. I don't even have a $10,000 "shit gonna break" fund right now, but we've owned our house for over 10 years.

Don't listen to a bitter renter for mortgage advice.
posted by Big_B at 9:31 AM on December 11, 2013


One end-run around PMI was to do a traditional mortgage for 80% and a second-mortgage for 20% of the house.

You can't do this anymore FYI.

Another recent change is that PMI will remain even when you own a fifth of your house--it used to go away.
posted by MisantropicPainforest at 11:54 AM on December 11, 2013


This is ridiculous. We had an FHA loan and wrote a check for $137 at close. That was our total cash outlay. I don't even have a $10,000 "shit gonna break" fund right now, but we've owned our house for over 10 years.

FHA loans have changed a lot in the past 10 years. 10 years ago, MIP (PMI for FHA loans basically) would add just 0.5% ($72) to your monthly payment if you borrowed $172,735 (the OP's amount) ; now it adds 1.35% ($194).

Also, 10 years ago, you could stop paying MIP after 5 years under most circumstances. Now, you can't stop paying MIP as long as you maintain the same loan; if you stay in the same house and either don't or can't refinance (say, you're underwater), you pay $43,920 more over 30 years under the new rules than you would under the old rules from 10 years ago. With private/non-FHA mortage insurance, you can pay off the PMI early.
posted by mistersix at 2:22 PM on December 11, 2013


Thank you again for the replies.

I can certainly understand being unhappy about owning when you sell at at loss. We are doing that now because we only just bought our current house 2 years ago and had paper pipes that we had to replace after a year. That's what we get when buying an older home- which is also why we are looking at a newer home now. We are also on the drained side because of moving, delay in pay, and COBRA. Normally, we are not this bad.

As for loans: Thanks to the info you all provided we actually decided try for a conventional loan. Our loan officer got back in touch with me today. We did the full credit check and went over funding and such and we were approved! I never would have thought of anything other than FHA if it weren't for the info provided here. Turns out, we have great credit scores! The upfront cost is more, but it makes the monthly payments right in our comfort zone and we can dump the PMI down the line.

Great call MeFites!

Now, to make an offer and get it accepted. That is a whole 'nother can o'beans. But if we lose this one, our approval is good till April.

Thank you all again!
posted by MayNicholas at 2:40 PM on December 11, 2013


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