Chris asks…
What is the best way to estimate a mortgage payment?
I’ve seen so many mortgage calculators but when I called a bank to get preapproved the payments were way higher. I got pre approved but here’s the numbers: House is 299,000. Taxes are 5,900. Insurance 1300 a year. Mortgage rate is 5.25 for fixed 30 year. If i put down 15k I would expect a payment around 2100 a month give or take a hundred bucks according to almost all online calculators. My bank said my payment woud be closer to 2500. This does not inlcude closing costs (I planned to pay them right away) Am I missing something or is my bank trying to screw me because I make good money and have good credit?
admin answers:
A lot of mortgage calculators could have assumptions in the fine print – which is why the two estimates are off. I doubt the mortgage company is trying to screw you, they use a pretty standard equation for every person.
The taxes are something that’s determined by the city you’re in – they are property taxes the bank is collecting from you in an escrow to pay the city. Closing costs are paid upon closing, they have nothing to do with monthly payments anyways.
If the numbers seem off to you, I would call the bank, and have them explain each cost, and then compare it against the assumptions on one of the mortgage calculators. It’s normal for the mortgage calculators to be less accurate because it’s not customized to your situation as much.
Ken asks…
current interest rates?
I have been trying to use some of these mortgage calculators and the default interest rates are around 8%…what is a reasonable interest rate for first time homebuyers with not great credit but a good income to debt ratio? And how much does credit score effect your interest rates
admin answers:
Here are the going rates for mortgages, this is if you have very good credit
http://bankrate.com/brm/rate/mtg_home.asp
Here is an article that demonstrates how much interest rates change for given FICO scores, although this uses data from a year ago.
Http://www.bankrate.com/brm/news/Financial_Literacy/March07_credit_score_mortgage_a1.asp
Ultimately it’s up to each individual bank and how much risk they are willing to take. Right now, they don’t want much/any risk so 8% might be the best you could get.
George asks…
What is the calculator used by mortgage and credit card companies when they “weigh” out income vs. expenses…?
What is the calculator used by mortgage and credit card companies when they “weigh” out income vs. expenses:
Thanks to the new obama plan; mortgage and cc companies do this for people who have hardships/ financially distress to determine a lower payment every month and lower the interest rate…etc.
The reason i want to use one is because my mortgage company (EMC) are true scumbags; they are taking my info over the phone and using their calculators but are answering back like used car salesmen… They literally told me at one time “sir, you’re just trying to jew us down”….
So i just want to see what they “actually” see when they plug my numbers in, cuz the amounts they’ve been telling me “i can afford” are impossible!
thanks in advance for your help
answerer #1: I’m not sure that’s the case.. and if it is; can you elaborate a little? is it gross monthly income?
btw, here are the 8 expense categories they ask about:
rent (or mortgage payment)
utilities
phone/internet/tv
car
insurance
credit card payments
food
gas/ transportation
and then they ask for monthly income, then they make me hold while they plug numbers in their “calculator“
admin answers:
They are using a 4th grade math equation…not some complex “calculator”. Here is the equation: Mortgage amount / monthly income CANNOT exceed 31%.
James asks…
When calculating tax savings from mortgage interest, should you use your marginal tax rate or average tax rate
The TurboTax and HR Block quick calulators appear to use average tax rate to determine tax savings. Our average tax rate was 15% this year. Most other calculators specifically designed for calculating mortgage interest tax savings use marginal tax rate, which for us is 25%. Which are we supposed to use for an accurate estimation of our tax savings? We’re thinking of buying a home and this weighs heavily in our decision process.
admin answers:
Compute your tax with out a home then add the home and see how much it changes.
If you get the standard deduction for a couple it is over 10,000 so that part is no savings. When you have a house you have property taxes and interest to deduct plus then your state income or sales tax and charity is deductable.
If you aren’t doing charity and pay $3,000 for property tax only any interest over about 6K will reduce your tax and it will reduce it at your marginal rate so you will save 25% of 6K or about 1,500 maybe 2,000 if you have high state taxes.
William asks…
Round Up Payment amounts to the 10ths in Java?
Am having trouble figuring out where to put a code in to round up payment amount and internterest rates in a mortgage calculator Java program code.
I have figured out how to get the math in formula
and the calculator works, I just can’t get the output
to read as rounded up and to the 10ths. ( i.e. 0.00 )
admin answers:
First, that would be rounded to the hundredths.
For accurate math with rounding, use java.math.BigDecimal.
For example:
String asString = “101.235”;
BigDecimal value = new BigDecimal(asString);
BigDecimal rounded = value.setScale(2, BigDecimal.ROUND_HALF_UP);
System.out.println(rounded);
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