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Do Mortgage Calculators Work?

If you’re looking into buying a home, you might be curious about what your mortgage payment would look like. Many people turn to online mortgage calculators that claim to tell you how much your payment could be on a home of any given price, but I’m here to tell you, these calculators are often quite wrong. Here’s why. 🙊!

1) It asks consumers to estimate their credit score.

They take this estimate to help determine the interest rate. But, did you know that your consumer credit score is DIFFERENT than the score used by a mortgage lender when determining rates? Most people only know their consumer score, meaning the calculator isn’t using accurate information from the beginning.

2) They only show a limited number of mortgage products.

There are literally hundreds of products available to consumers and these simple tools don’t ask all the questions needed to find the right product for your situation.

3) Sometimes they don't include PMI, Property Taxes or Insurance.

If you’re putting down less than 20%, you may be required to include PMI, or private mortgage insurance. However, the amount of PMI that you pay is partially dependent on your credit score, which again, these tools are not able to properly assess. That’s not the only additional cost that these calculators fail to factor in either. Property taxes, homeowner’s insurance, homeowner association dues or condo management fees, and closing costs are usually not part of the formulas of most mortgage calculators but do often factor into your final monthly mortgage payment.

Unfortunately, it’s somewhat common for folks to use these tools and get their hopes up about how much house they can afford, only to be disappointed when a mortgage professional runs the actual numbers. This is why it is so important to talk to a pro when you first start thinking about purchasing a home, as we can get an accurate picture of your financial situation in the beginning. This way you don’t waste any time by looking at homes that aren’t in your budget.

So, do you want to know how much house you can REALLY afford? Shoot me a message and let me connect you to one of my trusted mortgage professionals who can ask the right questions and give you an accurate picture of the possibilities - or 317-629-0070.

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