Here at Wyndham Capital Mortgage, we want to help you become a successful and happy homeowner. Your mortgage loan estimate plays a big part in the overall process, and we’ve found our customers are happiest when they have a firm idea of how much their mortgage will be. To help you get the keys to your new home as quickly as possible, we’ve provided information on how to properly calculate your mortgage estimate.
How To Calculate Your Mortgage Loan Estimate
Your Credit Profile
You knew this would be on the list, right? And for good reason. Just like you would give the keys of your new car to a responsible friend who has never gotten a ticket, lenders are likely to give loans to borrowers who have never gone into default on a loan and are responsible with their credit cards.
The moment you decide to become a homeowner is the moment you should start improving your credit score as much as possible. Not only that, but you should also pay your bills either on time or early, and take care of any debts you have.
The Length of the Loan
If you know you’ll be able to pay off your mortgage in 15 to 20 years, your mortgage loan will likely have a lower interest rate, which means you won’t pay as much. It’s when you have a 30-year mortgage that your interest rate and mortgage start swelling. To pay off your loan faster, you’ll want to either put down a large down payment (at least 20 percent) or opt for a home that’s not too expensive. You can also make extra mortgage payments toward the principal in addition to your regular payments.
Private Mortgage Insurance
Let’s say you’re unable to put down a 20 percent down payment on your home. As a layer of protection against you potentially defaulting on your mortgage, the lender is likely to require you carry private mortgage experience, also known as PMI. Going back to the example of letting a friend borrow your car, you might require an irresponsible friend to pay for a special auto insurance rider in case they have an accident.
Needing PMI increases your mortgage loan estimate and potentially the overall length of your loan. To make things easier for you in the long haul, you might want to put off applying for a mortgage until you’ve saved at least 20 percent of the cost of a home. That being said, you may even have the option of saving up more than 20 percent.
Imagine the unbridled joy of finding a home that’s absolutely perfect for you and your specific needs. Now imagine the deflation of defeat when you’re turned down left and right by mortgage lenders. You can avoid curling into the fetal position by getting pre-qualified six to 12 months before you start hunting for a home. While you might think you can easily afford a home that costs $50,000, your credit profile might say you can only afford a home that’s $37,000.
Pre-qualification lets you know how much lenders are likely to approve you for and how much your mortgage is likely to cost. While you’re getting pre-qualified, it’s also best that you get a copy of your credit score and look it over to make sure everything is in good order. Acting early gives you time to sort out discrepancies and clear up false information.
Besides using the above tips in figuring out your mortgage estimate, you can also use a simple mortgage calculator. For extra assistance, know that Wyndham Capital Mortgage is here to help you calculate mortgage loan. Becoming a homeowner is much easier when you have the help and support of experienced and trustworthy professionals. Interested in learning more? Let us help!