If you’re thinking about buying a new home in Texas—especially if it’s a first home—we want to say, “Congratulations!” It’s an exciting journey, and the payoff at the end is a home of your own that you can fill with traditions, smiles, and surprises to be remembered for a lifetime. As with any new journey, though, there are steps to take that you may be unfamiliar with. In fact, one of the frequently asked questions from new home buyers is: how do you calculate a mortgage? Where do you start? How do you know how much it will be? And how much you can afford? Fortunately, we’ve made it easy by breaking the whole process down into four simple steps that you can do yourself, from the principal to the payment terms. Plus, step 4 will provide a link to a handy mortgage calculator that will do the math for you, so you don’t even need to sharpen that pencil just yet…
Four Steps to Calculating Your Mortgage:
- Look at interest rates. While you might expect to start with the price of the home, which we’ll get to in step 2, even before you’ve picked out your dream home, you’ll want to familiarize yourself with interest rates. As you probably already know, interest is the price you pay to borrow money from a lender. And typically, when it comes to a mortgage, the bank or lender will be financing the majority of the total amount, since very few of us have the cash on hand to buy a home outright. In fact, a home mortgage is the largest single financial transaction that most of us will ever enter into, meaning that it pays to understand interest rates before you start signing anything.
- Calculate your principal mortgage amount. If that sounded a little complicated, don’t worry. Step 2 is a whole lot simpler. Once you’ve picked out your dream home here in Texas, all you have to do is subtract the down payment that you’re bringing to the table from the asking price for the home. The result is your principal. Simply put, the principal is the actual amount that the loan is financing. So, if a home was $340,000 and you had a down payment of $40,000, the principal loan amount would be $300,000—the difference in those two numbers. That’s the amount of money you’re actually borrowing from the mortgage lender, the percentage of the total home price that they’re covering and you’re promising to pay back over time. And speaking of time…
- Decide on a loan term. Most mortgages in the U.S. are typically 15 or 30-year loans. The names are self-explanatory, describing the window of time in which you’re expected to pay back the loan. So, with a 15-year mortgage, you’ll naturally be paying more every month, since you have half as much time to pay off your loan, but you’ll accrue less interest. There are other term lengths and options available besides 15 and 30-year loans, but these are both the most common and the most popular. To see which options are available, and which may be best for your situation, speak with your lender.
Most home buyers opt for a 30-year fixed rate mortgage. While they end up paying more in interest, their monthly payments are lower, which is easier for most budgets. When deciding what mortgage term is right for you, consider what your family can realistically expect to spend per month. It’s also worth keeping in mind that you can refinance your home loan down the road. A re-fi replaces your current home loan with a new one, meaning that you may decide to switch from a 30-year loan to a 15-year one, for example, if your family’s situation should change in a few years.
- Use a mortgage calculator to find a payment amount. Really, this is the best advice we have for you. Even when you know the drill, calculating your mortgage payment involves a lot of big numbers and a lot of opportunities for misplaced decimals and the like. If you’re thinking of buying a new home at Sandbrock Ranch, let us help you calculate your mortgage payment with our Texas mortgage calculator. Just enter the Mortgage Amount in dollars, the Mortgage Period in years and months, and the estimated Interest Rate. The loan calculator will automatically show you your estimated monthly mortgage payment, the total cost of your loan, and the estimated total interest paid. Easy, right?
Keep in mind that, for most home mortgages in Texas and elsewhere, a monthly mortgage payment will also include your homeowner’s insurance and property taxes. So, be prepared to factor that into your monthly mortgage total.
Whether you’re buying your first home or your forever home, home ownership is a smart long-term investment and now is a great time to buy! Mortgage rates change daily, but they are currently sitting at a historical low, meaning that home buyers in Texas can lock in lower interest rates and lower monthly mortgage payments on their dream home at Sandbrock Ranch—and we can’t wait to welcome you to the neighborhood!
If you’re looking for the home of your dreams in a community of like-minded neighbors who enjoy an active, enriched lifestyle, you’ve come to the right place! Visit Sandbrock Ranch today and see what the “Live True” lifestyle has to offer you and your family!