Is a Mortgage Calculator Helpful?
Consider this. I know that as a home buyer, it’s a critical part of the decision to know what the monthly costs are going to be. But with so many variables, I think mortgage calculators miss some vital pieces. For starters, property taxes and home owners insurance, if included, could be wildly off. Taxes in Utah are vastly different than elsewhere in the Union. Ours are much lower than many places. So if I build a mortgage calculator, I have to have a drop down to choose the area if I want accuracy. And isn’t accuracy what you’re looking for? What about home owners insurance? Some companies are quite high priced. Some home owners add on earthquake or flood coverage. This one tends to be smaller, but could be as much as $100/mo inaccurate. But of all the items that mess up mortgage calculators, mortgage insurance has got to be the biggest culprit.
If I add a drop down in my calculator asking if it’s FHA, USDA or VA, then I can get more accurate as those programs are more simple and predictable. But conventional loans through Fannie Mae and Freddie Mac vary wildly depending on credit score, down payment, and even loan program. For example, the Conventional 97% could typically have 1.05% mortgage insurance (think of this like an extra interest rate cost). Where Home Ready from the same vendor for the same buyer with the same down payment and credit score could offer mortgage insurance as low as .44%. On a typical sized mortgage of $250,000, that’s over $218/mo difference! Now you tell me, can you make accurate decisions with that kind of variance on it?
Should you use a mortgage calculator? Hey, who am I to say? I just want people to understand what they’re using. But this is why I give my clients a tool for that at pre-qualification.
We always start with the loan application and credit. Then we verify that information with their financial documents. Now that we know where they stand, we go through the loan options that pertain to them and discover together how to get them the very best deal. And with that knowledge, I give them a tool to calculate an accurate payment that is specific to them that includes taxes, insurance, and mortgage insurance for any priced home. It will be accurate and specific to the lowest cost loan which we discovered together... regardless of the price of whatever home they're looking at. Now that’s power! Now that’s a great deal!