Purchasing a home is one of the biggest financial transactions most people would make in their lifetime. It’s important to consider your budget when it comes to large transactions such as buying a home in Austin. In order to help determine the cost, a mortgage calculator will help provide an estimate of your loan so you can get a clear breakdown of the numbers that will work best for you.
There are a lot of numbers to juggle when it comes to mortgages such as the principal, interest rate, term, amortization, and more. It can get confusing but don’t worry. We’ll walk you through how to calculate your mortgage in Austin.
What is a Mortgage Payment?
A mortgage is a loan provided by a mortgage lender or a bank that enables an individual to purchase a home. While mortgage payments are how the borrower pays back your home loan. This monthly payment helps pay off the mortgage over time which will also include interest to your lender.
Costs Included in a Mortgage Payment
Mortgage payments are composed of four components also known as PITI. This acronym stands for Principal, Interest, Taxes, and Insurance.
Principal and Interest
The amount of money you have left to pay on the loan. This is the amount you initially borrowed from a lender to purchase your Austin home. Interest is the percentage of principal that you will be paying to the lender as a fee for the money borrowed.
Taxes and Insurance
The tax amount can change from year-to-year and is based on the percentage of your property’s value. They can range from 2% to 3.5%. The average tax rate in Austin is 2.4%. If you’re looking for a new home build, some of the newer master planned communities can have higher tax rates, typically ranging from 2.75% to 3.2%
Mortgages also include a homeowner’s insurance to cover damages to the home and the contents inside. This protects the house from disasters, theft, or fire. If you bought a home with a downpayment that is less than 20%, you’ll be paying for a PMI or private mortgage insurance to protect your lender if the borrower is unable to repay the home. It can then be dropped once the borrower has at least 20% of equity on the home.
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Different Types of Loans
There are different mortgage types available: Conventional Loans, FHA Loans, VA, and USDA loans. Conventional loans are simply backed by private lenders, a popular option for over 70-75% of home buyers. FHA loans are insured by the US Federal Housing Administration and are popular for first-time homebuyers with lower credit scores.
VA and USDA loans allow homebuyers to purchase a home without a down payment. VA loans are for eligible veterans and active-duty military personnel while USDA is a home for eligible rural homebuyers.
Bridge Loan is another type of loan that enables buyers to buy a property without contingency and gives buyers the ability to purchase a second home before selling their current house. You can learn more about Bridge Loans with the Spyglass Select Move Program.
How Lenders Determine How Much You Can Afford
For most loan types, lenders are required to assess your ability to pay the loan based on some factors such as your credit score, history, employment history, and debt-to-income ratio. Your credit score is an important factor that can affect your interest rate. Consider checking your credit history and reviewing your reports for any errors. This is one of the first important steps you need to take.
Your employment history is another criteria that lenders use where they will take a closer look at your recent employment history. Some lenders see a borrower that has held the same position for more than a year as low-risk while compared to a buyer that has just started their new job. Debt-to-income ratio is also used by banks and lenders to determine a borrower’s payment capacity. This is the percentage of pretax income that goes into your monthly debt payments. Lenders are favorable to borrowers who have a debt-to-income ratio of 28% to 36%.
How to Calculate Your Mortgage in Austin, Texas
Use a mortgage calculator to simply calculate your mortgage. Our mortgage calculator below is designed to easily provide you with an estimate based on your input. It can help you determine the monthly payments of your home mortgage loan based on the home’s sales price, loan term, down payment percentage, and the loan’s interest rate.
On the Sale Price of Home, input the price of your ideal home in dollars. Indicate the percentage amount of your down payment on Percentage Down. Length of Mortgage will be the field where you’ll add how long will you be paying the mortgage. Annual Interest Rate is the rate you’ll be paying your lender year-per-year which is in exchange for borrowing the money to purchase the property.
To view a more detailed calculation of the mortgage, tick Show me the calculations and amortization to give you a more comprehensive overview of your mortgage.
Becoming a homeowner in Austin is certainly not that easy, but being familiar with the local market, knowing your budget, and finding a reliable Realtor and lender are just a few steps to get you started. Click here to compute your mortgage or speak to a Real Estate Consultant who will guide and navigate you through your journey in buying your dream home in Austin, TX.
Posted by Ryan Rodenbeck on
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