When you enter the planning stages for a new home loan, you’ll want to know how to budget for the expenses of your mortgage such as the appraisal fee, down payment, home inspection, etc. But you will also want to know about the monthly mortgage payment–how much it could be, how you need to adjust your personal finances to accommodate the new loan, etc.
That’s why one of the most important questions a home loan applicant can ask in the planning stages is, “How much will my monthly mortgage payment be?”
It’s easy to assume this is a simple calculation of how much the loan is, divided by how many months the mortgage loan payments are required. But is it REALLY that simple? The truth is that it’s more complex than that.
There are many other things that must be factored into your monthly payment and one way to make sure you don’t miss any of the details is to use an online mortgage calculator to help arrive at estimates.
What kind of information goes into the calculation of your monthly mortgage payment? If it’s not a simple matter of taking the loan amount and dividing it by the number of months the loan term is set for, what DOES go into those calculations?
The basic calculation we mention is part of it, but add in hazard insurance, mortgage insurance premiums and other expenses (plus any add-ons to the loan the borrower might choose such as an Energy Efficient Mortgage or EEM) and you have a list of items that must be factored in.
HUD 4000.1 is the FHA lender’s handbook. On page 311 of that document there is a list of items that may be part of the calculation you’ll make to arrive at the total mortgage payment:
-Principal and interest
-Real estate taxes
-Flood insurance as applicable
-Mortgage Insurance Premium
-HOA or condominium association fees or expenses
-Ground rent (where applicable)
-Any required special assessments
-Payments for any acceptable secondary financing; and
-Any other escrow payments.
According to HUD 4000.1 in this section, “The Mortgagee may deduct the amount of the Mortgage Credit Certificate or Section 8 Homeownership Voucher if it is paid directly to the servicer”.
It is easy to see that multiple variables go into the mortgage payment calculation, which is just one of the reasons why it’s important to carefully review add-ons to the loan to see how they will affect the mortgage calculation.
What kind of add-ons? Financing discount points (where applicable and permitted), FHA Energy Efficient Mortgage funds, etc. It’s clear that a borrower can watch her/his mortgage payment go up; unless add-ons to the loan amount are carefully monitored you may find your payments higher than you prefer.
You CAN get a realistic estimate for your monthly FHA mortgage loan or refinance loan payments using a mortgage calculator, and it’s a very good idea to keep a close watch on any additional expenses you might need to include (the add-ons) in the appropriate part of the planning stages of the loan.