There are many online mortgage calculators available to help you determine what an estimated monthly payment would be on a home purchase loan. Although you can easily plug and play with most of these calculators it is important to understand that many variables exist.
When you attempt to do this on your own, important information relating to the total cost of a monthly mortgage payment can often be missing or incorrect. Here are five important fees that mortgage calculators often don't include in the monthly payment and even if they do, many times are inaccurate.
Homeowners association dues are generally required on master planned communities where a developer has built a large track of homes and planned for certain amenities to be available for residents. These fees are usually paid outside of the monthly mortgage payment and are due to the association on a monthly, quarterly, or annual basis.
Community development district fees are a vessel used by developers to cover the costs of building amenities or improvements in a neighborhood. They borrow money from the county and place the responsibility of payment for the loan on the buyer that purchases the home.
These fees are usually paid over a 20–30-year period and the yearly cost is added to the real estate tax bill. Don’t confuse these with homeowners’ association dues as they are different, and some communities have both HOA and CDD fees required to be paid by the homeowner.
These are real costs that must be considered on any monthly budget. They are typically paid annually or as part of the monthly payment as part of an escrow account.
The cost of real estate taxes varies based on the county the property is in and the tax-assessed value of the home. The cost of homeowners insurance depends on the location and types of insurance required for the property: homeowners, wind, and or flood.
Mortgage insurance often gets confused with homeowners’ insurance, but they are not the same. Homeowner's insurance covers the property, and mortgage insurance covers the lender in case the borrower defaults on a loan that's more than 80% of the value of the home. This rate or cost is determined by the borrower's final loan-to-value ratio and credit score.
Obviously, the interest rate you pay on the loan is very important to get an accurate monthly payment. Rates are constantly changing based on market conditions and require a licensed mortgage professional to give an accurate quote based on the loan amount, loan-to-value ratio, credit score, and loan program.
As you can see, there are many things that make up an accurate monthly payment. All require careful review of the property and the borrower's financial information that an online mortgage calculator can't do.
If you intend on using one of these online mortgage calculators, do it to get a loose idea of the payment range. You should only rely on the principal and interest payment; all other potential monthly expenses are very difficult to get accurate without the help of a licensed mortgage broker or correspondent mortgage lender.
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