How do I calculate my mortgage payment?
An online mortgage calculator like this one will get you the answers you seek if you're simply trying to figure out your future home payment, but if you're more interested in how the sausage is made, below is the basic formula for a mortgage payment:
This formula will give you your basic principal and interest payment, rather than the principal, interest, taxes, and insurance (PITI) that many people consider the mortgage payment. However, even this may not include everything you'll pay your mortgage servicer every month.
Other charges that might be wrapped into your mortgage payment could include flood insurance, wind insurance, or mortgage insurance. Mortgage insurance comes in different types, depending on the type of loan you have. This coverage benefits your lender -- if you stop paying on your loan, it helps the lender recoup its costs of seizing and selling the home. If you have a conventional loan and made a down payment under 20%, you'll pay private mortgage insurance (PMI) every month. Or, you may have to pay a mortgage insurance premium (MIP) upfront and then monthly for an FHA loan.
Lastly, if you live in a homeowners association, you could owe dues or other assessments. This payment can be included in your mortgage escrow, and you'll pay it monthly as well.
You can plug these extra expenses into our Louisiana mortgage calculator to give you the best estimate possible of your future monthly housing costs.
Things to know before buying a house in Louisiana
Louisiana has a pretty stable real estate market, with a lot of housing supply to offer, making it easy to know what to expect from your home-buying journey. You can also generally expect very low taxes, as Louisiana has the lowest property taxes in the nation, at just 0.18% of the property's assessed fair market value. That means that if your home is assessed at $135,400, you'll only pay $243 per year to the parish.
Louisiana hasn't yet experienced a significant rise in temperatures due to climate change, but it's having other very serious problems. For example, since much of the most inhabited parts of the state are built on and among marshlands, a rising sea level is consuming land, which, when compounded by the natural sinking nature of much of the river delta, is drastically reducing the size of waterfront property to the tune of about 25 square miles per year.
Both hurricanes and flooding are becoming more intense, with flooding coming both from said storms and from flooding on the Mississippi river due to increased rainfall that drains from the Midwest. Due to this, you definitely want to consider insurance beyond basic homeowners insurance. Floods are becoming bigger and worse all the time in parts of Louisiana, and the cost of clean-up can be significant.
Always ask your agent if you're at risk of natural disasters like hurricanes or floods, but many places that never were at risk of flooding before are now, making the extra cost worthwhile. You can also plug this into the Louisiana mortgage calculator for a better idea of how it will affect your monthly housing costs.
Tips for first-time home buyers in Louisiana
The Louisiana Housing Corporation has several programs to help homeowners and home buyers do more with their money in the state, with some assistance focused on very limited parishes. However, first-time home buyers across much of the state can take advantage of the following programs.
The Mortgage Revenue Bond Assisted Program
The Mortgage Revenue Bond Assisted Program is designed to help first-time home buyers with a soft second mortgage of up to 4% of the home's mortgage amount. Buyers must qualify for the mortgage program with a credit score of 640 or greater, as well as income levels and a home purchase price below established caps for each parish.
Resilience Soft Second
The Resilience Soft Second is another option for home buyers in many Louisiana parishes. It's a soft second loan, meaning there will be no payments due unless the home is sold or the mortgage refinanced before the 10-year term is up.
It's also a forgivable loan, self-extinguishing at the end of the 10-year mortgage term. Borrowers can get assistance of 20% of the home's purchase price, up to $55,000 PLUS an additional $5,000 for closing costs, for a total of $60,000.
Buyers must qualify and meet income requirements. In addition, properties are not allowed to be in designated flood zones at the time of purchase.
Advice for all first-time borrowers
Buying your first home can be overwhelming, exhausting, and downright frustrating, especially in a difficult market. However, you can make yourself more appealing to you mortgage lender by doing a few simple things:
- Keep your credit score high with on-time payments
- Lower your debt-to-income ratio and credit card utilization by paying down debt
- Maintain steady employment and steady income for two years prior to applying and then through closing
- Don't change anything about your credit profile once you've found a home -- underwriting will check everything again just before closing to make sure you still qualify for your mortgage.
You can do yourself a service by knowing what you can afford, and only looking at homes in that price range. Last, but far from least, remember that doing online research is great, but always trust your real estate agent's experience to guide your home-buying experience -- that's what you hired them for.