Your mortgage is one of the biggest financial decisions you will make in your lifetime, but mortgage calculators can make this stressful process a simple and informed decision for people looking to finance their home purchase. Mortgage calculators are a great resource to help take the guesswork out of these hefty loans by showing you the monthly payment, total interest paid, total repayment period, and more.
The Responsive Mortgage Calculator is a great tool that’s meant to assist you with your mortgage search, and of course, calculating a mortgage. With just a little bit of information, this mortgage calculator can help you navigate the challenging world of mortgages.
Up next, we’ll answer frequently asked questions about mortgages regarding interest, down payment, and the overall financial impact of this decision. We’ll close the article by providing a list of the top banks we recommend for obtaining a mortgage loan today. Read on for all you need to know about mortgage calculators.
What Information is Needed for A Mortgage Calculator?
Mortgage calculators have been helping potential homeowners figure out essential financial information regarding their mortgage loans for years.
For instance, the Responsive Mortgage Calculator can calculate your weekly, bi-weekly, or monthly mortgage payments, depending on your period preference. However, this tool can’t provide informed data without some important information from you first.
For a mortgage calculator to provide accurate information regarding your mortgage loan and payments, users will need to enter information regarding:
- The total cost of the home
- The down payment amount
- A fixed interest rate
- The amortization period (mortgage term)
Users can also choose the payment period of their choice (weekly, bi-weekly, monthly) before calculating their potential mortgage payment. Once all of the information has been successfully calculated, the tool will provide a concise but informative chart that details:
- Mortgage payment
- Total mortgage payment with interest
- Total with a down payment
This will give users an overview of what this particular mortgage would cost them, allowing them to decide if the payments are affordable or if they need to alter aspects of the loan, such as their down payment or amortization period, to make it more financially reasonable or affordable.
Mortgage Calculator
How Does Adding More Interest Affect My Payment?
One of the most influential elements of your mortgage payment calculation is your fixed interest rate. Interest is a monetary charge or the cost of borrowing money from a lender or third party. It is charged as a percentage on top of the principal (the amount that is loaned) and generally expressed as an annual percentage rate (APR), meaning the loaner charges you the same percentage on an annual basis.
Generally, increasing the fixed interest rate on your mortgage loan will increase your monthly payments. This is because the loan charges you a higher percentage of the principal (your overall loaned amount), resulting in higher monthly payments year-round.
While interest might seem unfair to the borrower, it provides your mortgage loan lender an element of safety and compensation for taking the risk of giving you mass amounts of money they have to wait years for you to pay back. Therefore, the loan not only provides a sense of security but also gives loaners a guaranteed return on these investments.
What Can Affect Your Interest Rate?
The loan’s interest rate is calculated a little differently for every individual and loan type, but for the most part, they are ultimately determined by:
- The credit risk
- Time
- Tax considerations
- Convertibility of the particular loan
Loan recipients can’t really affect any of these factors apart from their amortization period (the number of months or years they agree to repay the loan within). However, one other factor within their control is their credit score.
A person’s credit score can significantly affect their loan interest rate because it directly reflects their credit risk. A borrower with excellent credit will typically qualify for a rate lower than someone who has middling to poor credit, but that is not always the case.
In general, one can expect their mortgage interest rates to be higher if they have less favorable or risky personal financial circumstances, such as poor payment history on debts, defaulting on loans, and filing for bankruptcy.
How Does Increasing My Down Payment Impact My Mortgage?
You can make your mortgage more manageable and less financially straining over the years is to have a significant amount of money saved that you intend to use for a down payment.
A down payment is a large lump sum that a borrower will pay upfront before taking ownership of their home. This is a required payment, and the amount typically depends on the mortgage loan, the loan recipient’s financial status, and the type of property purchased.
The size of your down payment could have a significant impact on your monthly mortgage payments. For instance, a larger down payment can help you qualify for better interest rates and lower monthly payments. This is because the down payment goes straight to paying off the principal of the loan, resulting in smaller monthly payments.
Of course, your monthly payments can still be affected by the amortization period. If you decide to pay off your mortgage in three years instead of five, the monthly payments will be higher regardless of your down payment. However, they will be undoubtedly lower if you pay more up-front.
Another reason you might want to have a higher down payment is because it will help you avoid private mortgage insurance (PMI). PMI is required when the 20% equity threshold has not been met or exceeded.
So, if you put less than 20% of a home’s mortgage down on your down payment, you’ll experience insurance charges of 0.5% – 1% of your loan amount per year. This might sound small, but for a $300,000 home, it means you’re paying about $1,500 – $3,000 per year in mortgage insurance.
Therefore, if you can manage to save a substantial sum and put enough down on a home to avoid this additional charge, we highly recommend you do so.
What is a Conventional Mortgage?
If you’re new to mortgages, you might not know that there are actually two types of mortgages- Conventional and FHA.
Conventional mortgages are loans made without government guarantees, so typically, a borrower needs to have at least a 20% down payment to qualify for this type of loan, or they will have to pay for PMI. These mortgage types are obtained through a third party or private lenders, such as banks, credit unions, and mortgage companies.
Conventional mortgages are usually accessible for people willing to pay more on their down payment, have higher credit scores, and need more than $300,000 on their mortgage loan. These loans are harder to obtain because they prioritize low-risk individuals with exceptional financial history.
This differs widely from FHA loans, and there are various pros and cons of each mortgage type depending on your financial situation and mortgage loan goals.
Conventional Mortgage Versus FHA
A conventional mortgage loan is usually for loan recipients who have enough saved to pay the 20% equity, resulting in lower interest rates and monthly payments. However, because these loans come from private lenders or third parties, they are harder to qualify for, particularly for individuals with poor credit and a high-risk financial history.
Comparatively, the FHA loan is more appropriate for people who have lower than average incomes, low credit scores, or can’t afford the standard 20% down payment on their homes. This type of mortgage is obtained through a mortgage lender approved by the Department of Housing and Urban Development and is often preferred by first-time homeowners.
An FHA loan will only require a 3.5-10% down payment depending on your credit score (usually 500-579 is 10% and 580+ is 3.5% or less) versus the Conventional, which often requires a score around 620 or higher.
However, a downside of FHA loans is that mortgage insurance is mandatory regardless of your down payment amount, and they have much stricter property standards than conventional mortgage lenders, so they might not approve that fixer-upper you’ve been eyeing. Additionally, it’s not uncommon for FHA loans to have a lower loan limit of around $314,827, which most conventional loans can exceed, making them the optimal choice for people searching for pricier homes.
Three Popular Banks Offering Mortgages
Half the challenge with mortgages is finding the right place where you can obtain a reasonable loan and affordable rates. To save some time, we’ve narrowed down the list to three of our favorite banks that offer conventional mortgages.
Bank of America
One of the best places to start when looking for a mortgage is Bank of America. They offer competitive rates and will work with you to find the right fit for your needs, whether an increased payment period, larger loan amounts, or smaller monthly payments.
A perk of choosing Bank of America is that they offer exceptional loans at lower rates than the national average, resulting in lower payments than those offered by competitors.
They only require a 3% down payment and credit score of 620 to be approved for their loans and can close a deal in 30-45 days.
We highly recommend this bank’s mortgages to first-time homebuyers because the bank offers first-time homebuyers grants and programs to cover down payments and closing costs.
Of course, there are perks to other applicants, such as America’s Home Grant program, which offers lender credit of up to $7,500 toward certain closing costs, including discount points. The Down Payment Grant is another option that can offer up to 3% of the home’s purchase price to a maximum of $10,000.
Chase Bank
Another quality bank option for a mortgage is Chase Bank. Here, applicants can reap the benefits of many loan types and products with convenient online access and exceptional rates.
Like Bank of America, Chase Bank only requires a 3% down payment and will typically approve applicants with a credit score of 620 or higher.
Applicants can easily submit their mortgage application online by uploading various necessary documents and answering the prompted questions, a process that takes mere minutes and receives a speedy response from a bank representative.
Chase Bank is an exceptional option for individuals looking for options in their mortgage regarding fixed-rate mortgage, adjustable-rate mortgages, and loan amounts. Applicants can apply for jumbo loans up to $3 million, a rare option.
Chase also offers FHA loans, VA mortgages, and DreaMaker mortgages to make their loans affordable and accessible for a wide range of individuals and financial statuses. Grants of varying amounts are also available to applicants depending on their mortgage type and home location.
Flagstar Bank
Flagstar Bank might not be as widely known as the two banks previously listed here, but it is a strong contender in the mortgage industry.
Again, this bank shares the same credit score requirement of 620 or higher for their FHA, ARM, and USDA loans, but their VA loans will sometimes require a higher score depending on the loan and individual.
Their APR is a competitively low rate of 2.7%, and they even offer some mortgage loans that don’t require any down payment, which can be beneficial to applicants attempting to acquire a home but have little currently saved.
Applicants can use Flagstar Bank’s user-friendly website to apply for a mortgage loan and expect to receive a pre-approval decision in less than three days and close in 35 days.
This bank specializes in multiple property Loans, high balance loans, and jumbo adjustable rates, so if any of those pertain to you, we highly recommend looking into Flagstar Bank for your mortgage loan.
Final Thoughts
A mortgage is a significant financial decision you don’t want to take lightly. Fortunately, the right tools, such as a mortgage calculator, can make this process infinitely easier than going in alone. Make sure you understand your financial situation before you attempt to apply for a mortgage loan, as some loans will fit you better than others.
Banks such as Bank of America, Chase Bank, and Flagstar Bank can help you determine which loan benefits you most and will provide you with exceptional service ensuring you can obtain and enjoy the home of your dreams without unnecessary financial strain.