Not everyone likes math… and that’s okay! The great news is that the folks at Mortgage Atlanta LOVE math, which is a very good thing, since the mortgage business involves A LOT of calculating. From loan-to-values to debt-to-income ratios, we’re virtually walking calculators as we work to find the best loan options to fit your needs. While we are happy to serve as your personal mortgage mathematicians, here are a few simple calculations you can perform on your own…
Conveniently located on the homepage at www.mortgage-atlanta.com, our Mortgage Calculator is an excellent tool for helping you determine how much home you can comfortably afford. It can also be used to determine how much you’ll need to save for a down payment in order to get that monthly mortgage payment to fit your budget. Exceptionally easy to use, simply plug in the purchase price, down payment, interest rate, loan terms (from 5 to 30 years to pay off), estimated annual taxes, estimated annual insurance, and monthly HOA. You can find many of these line items on the MLS listing of the home or homes in which you are interested. Once you’ve filled in all the fields in the calculator, it will supply you with a snapshot of your projected Monthly Mortgage Payment, Principal & Interest, Monthly Taxes and Monthly Insurance. Depending on those calculations, you may find that you could potentially afford a more expensive home. Feel free to play around with a number of scenarios involving homes of different price points, varying amounts for your down payment and a variety of different terms. Once you have a better idea of how much home you can afford, you may be ready to prequalify!
Your loan-to-value ratio (aka LTV) is the total loan amount divided by the value of the property you hope to purchase or refinance. Let’s say you plan to put 20% down – or $20,000 – on a $100,000 home. That means your loan amount will be $80,000. Divide that loan amount by the value of the home: 80,000 / 100,000 = 80% - that number is your LTV. Loan-to-value ratios are used to determine interest rates and whether or not your loan will require mortgage insurance.
It’s good to have a general idea of your debt-to-income ratio before you get really serious about your home search as it will be used by mortgage lenders to determine whether you prequalify for a home loan and which loan programs would work best for you. In its simplest terms, it is your monthly financial obligations divided by your gross monthly income. Those obligations will include student loans, car payments, minimum payments on credit cards, etc. Be sure to add in the mortgage, taxes, insurance and HOA dues you determined using the Mortgage Atlanta Mortgage Calculator. Then take your gross annual income and divide that number by 12 months to determine your monthly gross income. Finally, divide your monthly obligations by your monthly gross income. For many lenders, a debt-to-income ratio of 43% is the highest they will go to prequalify you for a home loan. Mortgage Atlanta has loans that go up to 50% and even above on debt-to-income ratios.
Two math-related questions we receive most often are, “How much am I paying in interest each month?” And “How much am I paying in principal?” To determine those answers on your own, follow these steps (you might want to have a calculator handy) …
• Take your loan amount times your interest rate to determine your annual interest. If your interest rate is 5%, you’re going to multiply your loan amount by .05. If it’s 3.25%, you’re going to multiply your loan amount by .0325.
• Take that number and divide it by 12 to learn your monthly interest payment.
• For example, if you owe $100,000 on a home and your interest rate is 5%, you’re going to multiply 100,000 x .05 = $5,000 is your annual interest. Then take $5,000 and divide by 12 months = $416.67 is your monthly interest rate.
• To determine your monthly principal payment, take your entire monthly payment amount and subtract the number you just revealed as your monthly interest rate. The remaining amount will be your monthly principal payment.
The loan specialists at Mortgage Atlanta are ready and waiting to help you calculate your way into your next home. We invite you to connect with us via online contact form or by phone at 678.564.1522. You can also reach out directly to our resident “numbers guy,” Brian Berman by email at bberman@mortgage-atlanta.com. We look forward to hearing from you!
