Whether it’s your first home purchase or you’re a homeowner many times over, buying a home is an exciting time, filled with hopes and dreams for the future. Of course, dreaming about the future should also include some research and planning.
The good news is that when it comes to home loan purchases, there are tools to help you prepare. From Solarity Credit Union’s Home Loan Guides to resources like home loan calculators for your WA purchase, we’ll be by your side every step of the way.
How to use a home loan calculator for adjustable-rate mortgages in WA
There are home loan calculators for all mortgage types in WA, including home loan purchases and home loan refinances. If you’re considering buying a home, you’ll want to use a home loan purchase calculator before deciding on your mortgage options.
One of the first things you should think about is whether you want an adjustable-rate mortgage (ARM) or a fixed-rate mortgage. If you’re uncertain which mortgage type you prefer, you can use both home loan calculators to compare.
If you’re based in Washington State, it may be useful to meet with one of our Home Loan Guides to get pre-approved for a home loan purchase before you start plugging numbers into a home loan calculator. Once you’re pre-approved, you can get a general sense of your expected interest rate (though, it may change based on market conditions at the specific time you close on your loan) and your estimated loan approval amount. You can then use these numbers as a baseline for the home loan calculator and adjust them as you see fit to experiment with different scenarios.
How it works
Let’s say you want to explore an adjustable-rate mortgage. ARMs have variable interest rates, but they typically come with an initial fixed-rate period. Using Omni’s ARM home loan calculator, you’ll select from the options of a 10/1 ARM (meaning the interest rate will adjust on an annual basis after the fixed-rate period of ten years ends), 7/1 ARM, 5/1 ARM or 3/1 ARM. You also have the option of selecting a customized ARM type if the pre-set options don’t fit your unique needs.
Let’s say you take out a $200,000 ARM with a 15-year loan term at an interest rate of 5% and a fixed-rate period of 3 years. Your expected adjustment rate is 1% with an interest rate cap of 10% (meaning your interest rate will never exceed that). Selecting a 3/1 ARM (meaning your interest rate will adjust on an annual basis after the fixed-rate period of three years) and the manual setup option (meaning the interest rate will vary at the specified frequency), you can see that your estimated monthly payment amount will range from $1,580 a month to about $1,972 a month. Your average annual percentage rate (APR) over the life of the loan is about 8.3%.
How to use a home loan calculator for fixed-rate mortgages
But let’s say you would prefer a fixed monthly payment so you know exactly how much you’ll be paying on your home mortgage each month. Using Solarity’s home loan calculator below, you can input the estimated purchase price, down payment, loan term and credit score range to get your prospective interest rate and monthly mortgage payment amount.
So, for instance, if you anticipate buying a $250,000 home with a 20% down payment, you’ll plug a purchase price of $250,000 and a down payment amount of $50,000 into Solarity’s home loan purchase calculator. Now, you’ll select a 10-, 15-, 20- or 30-year loan term. For the purposes of this example, we’ll select a 15-year loan term.
Next, select your credit score. We’ll select a credit score of 740 and above. Hit the “Do the math for me button,” and voila! You have your estimated monthly mortgage payment.
Using our example, we have a monthly mortgage payment of roughly $1,580 based on a 5.00% interest rate and a 5.50% APR. This example also includes points paid at closing in the amount of $4,500.
Once you get your initial estimate, you can modify the numbers with a different down payment or loan amount based on your financial situation.
Why a home loan calculator can be helpful
To start, a home loan calculator is useful for assessing how much home you can actually afford. For instance, you may be prequalified for a $200,000 home loan. Yet, by using the home loan calculator, you may realize you’re unable to afford the monthly mortgage payment with your current budget. If so, you may want to look at homes listed below $200,000 instead. Play around with the home loan calculator until you find a monthly mortgage payment that feels comfortable.
A home loan calculator will also show you how much interest you’ll pay over the life of the loan. Knowing exactly how much interest you’ll pay will inform other decisions you have to make, such as choosing a loan term and setting your monthly budget.
If you want to keep your monthly mortgage payments small and affordable, a 30-year loan term may be preferable. However, if your goal is saving more money over the life of the loan, you may want to opt for a shorter loan term that will require you to pay less interest overall.If you’re interested in using a home loan calculator for a home loan purchase in WA or want to meet with one of our Home Loan Guides to learn about more homebuying resources, reach out today. Solarity Credit Union’s expert team will provide the information you need to make empowered choices. Together, we’ll find a path to homeownership that’s right for you.