The Best Way to Calculate a Mortgage Payment

How to calculate a mortgage payment is one of your most important decisions when purchasing a home. Rather than be a mathematician, you will just need to learn a little bit about the process and what it is all about. You will have many choices when it comes to figuring out what your payment will be. Key to the process is what your credit is and what you will want to borrow.

What kind of mortgage do you want? Whether you choose an adjusted rate mortgage (ARM), a fixed, or a balloon type payment will depend mainly on how much money you make and what your credit score is. These variations will cost you dearly if you are not well informed about their differences!

If you get a balloon mortgage you will have to pay it off or refinance it every 5 or 7 years generally. Interest rates can change daily and so will your ARM. Your rates could start as low as 5% and go up passed 8% in a short period. The rates don't stop there either; they could go very high, with no cap. Don't make the mistake of comparing a low ARM rate to a higher fixed rate, the fixed rate won't change but the ARM will. With a fixed rate of 7% what you start with is what you will end your mortgage rate with.

Do you have a large or small income? When a loan agent reviews your loan they will look at you using between one fourth and less than one half of what you make monthly or yearly. The best bet is not to spend more than a third of the money you make each month on your house payment. Basically you can look at it like this, if you are bringing home $1200.00, you will want your house payment around $400.

Are you aware of your credit score? The four basic categories for credit scoring are poor, fair, good and excellent. If you have good or excellent credit, the interest rate that you are offered is usually going to be lower. If your credit is in the low ranges, you can expect to see higher interest rates. Most mortgage loans are based on simple interest.