The budget is the single most important factor that influences your decision of buying a house. It is easy to get loans, but you should know how much loan you can afford to take according to your financial situation. Tools like a mortgage qualifier calculators come in handy for estimating your budget for the house and the amount of mortgage you should take. Such calculators also help you determine whether or not you will qualify for a home mortgage based on your income and expenses.
But you should remember that these mortgage calculators are just self-help tools and do not substitute professional financial advice. More often than not, the companies providing such estimator services do not guarantee that the calculator will be applicable or accurate in a particular case, especially since different lenders may have slightly different rules of applying interest rates and other mortgage terms. Nonetheless, these tools give you some good starter estimates, which you can use to do some helpful financial planning.
There are various inputs that go into a mortgage qualifier calculator such as your annual income, monthly payments, purchase price of the property, down payment, annual interest rate, closing costs, debts etc. Some of these inputs are discussed here.
Annual income that goes into the calculator is the gross annual income of all persons whose name will appear on the mortgage. For a married couple, it is the total combined gross income. Some calculators also determine the annual gross income as output from the input of purchase price or monthly loan payment. Purchase price is the market value of the property that you are looking to buy. This is the total cost of the house excluding any mortgage closing costs. If your gross annual income and monthly payment are entered as inputs, the qualifier calculator can calculate the purchase price that you can afford. The total monthly payment can also be either an input or output of the calculator and refers to the sum of principal, taxes, interest and insurance expenditure likely to be paid by you each month.
Other important inputs that can be required in a mortgage qualifier calculator are the down payment for the purchase, interest rate and the number of years the loan is to be paid off in. Other inputs can include the annual property tax, heating and cooling costs of the property etc.
Some calculators also require you to input total monthly payment for your car loans, credit card payments and other debt payments. All good calculators will also take as inputs the closing costs of a mortgage. You may also need to take into account mortgage loan insurance premium that is payable in case you are purchasing a property using a very low down payment. If you are willing to make a down payment of more than 25%, it is quite likely that you will not have to pay any separate insurance premium.
With all these inputs, a mortgage qualifier calculator gives you an estimate of how much money you can afford to spend on your new house or what is the mortgage loan amount that you will require to buy the house.