How do I calculate my mortgage payment?
For most people, the urge to calculate their mortgage payment on their own comes from simply wanting to know what they're going to be spending, but instead of subjecting your finances to the errors of manual math, a mortgage calculator can give you more simple answers. If, on the other hand, you want to see how the sausage gets made, here's the basic formula:
Your basic mortgage payment, commonly referred to as "P+I" or "PI," is just made up of your mortgage's principal and interest. And for some people, that's all there is. In that case, your entire mortgage payment is based on your principal, interest rate, and term, which is the amount of time you have to repay your loan.
Most mortgage payments these days also include additional fees, like:
- Real estate taxes
- Homeowners insurance
- HOA assessments and fees
- Private mortgage insurance (PMI) or mortgage insurance premium (MIP), depending on your loan type and amount of your down payment
- Perhaps additional insurance (like flood or wind insurance)
To calculate your new mortgage with these additional expenses included, just click "show additional inputs" on the mortgage calculator above and add your estimated figures. It will get you a very close estimate of what to expect.
Things to know before buying a house in Maine
Buying a home in Maine is generally an attainable goal for most buyers, but beware the relatively high property taxes there. Mainers will spend an average of 1.09% of their home's assessed fair market value on taxes every year. That means for a home assessed at $177,500, the taxes paid will be $1,936 every year. Maine ranks 18th in the nation for property taxes as a percentage of home value.
In some ways, climate change may actually benefit Maine residents, since it will help take the edge off of those incredibly cold winters, but it is also bringing with it new problems. More intense rain and rising sea levels will make flooding a much bigger issue, especially as Maine's wetlands are overtaken by the ocean. Storms and storm surge is also a serious potential threat in the coming decades, so Mainers should be prepared, especially considering how many live near the water.
In coastal Maine, especially, signing up for coverage beyond your homeowners insurance policy, including wind and flood insurance would be good bets to take. These hazards are often not covered under a basic plan, so ask your insurance agent what coverage you're getting and what's likely to be really needed in the coming years.
Once you have the insurance figures, you can also plug that number into the Maine mortgage calculator to help give you a better estimate of your overall monthly payment.
Tips for first-time home buyers in Maine
The Maine State Housing Authority, MaineHousing, provides two grant programs for first-time home buyers, depending on their circumstances.
Advantage grant
The Advantage grant is a $5,000 flat grant for first-time home buyers in Maine to help cover down payments, closing costs, and any prepaid escrow expenses due at closing. It's available for several different types of properties, including mobile homes with land, and standard single family residential homes.
Borrowers must contribute 1% of the loan amount out of their own funds, but that money can be in the form of gift funds. They also need to complete a home buyer education course before their grant will be approved.
First Generation pilot program
The First Generation pilot program is a unique program for first-time Maine home buyers who did not grow up with a tradition of homeownership and who have never owned a home. This program is expressly designed for borrowers who have never lived in a home owned by themselves or their parents or guardians, as well as borrowers who were in foster care.
The grant portion of the program provides a total of $10,000 to qualified borrowers who complete both a financial literacy and home buyer education course. Like with the Advantage grant, home buyers will need to contribute at least 1% of their loan amount in funds at closing.
Advice for all first-time borrowers
Even if you don't qualify for a first-time home buyer program in Maine, there are lots of opportunities for great loans in the state. Because much of the state qualifies under USDA Rural Development rules, you may be able to get a USDA home loan through this program as well.
Before you apply for a mortgage anywhere, though, make sure that you're truly ready. A well-qualified buyer will not only often qualify for a better rate, they'll be able to bring a stronger offer in a multi-offer situation. Be the best buyer you can be by:
- Staying at your job for at least two years, because lenders want to see that your income is stable
- Having a dedicated savings account with two to six months of mortgage payments put aside
- Making all your payments on time to maximize your credit score
- Keeping your down payment and other closing money in a dedicated bank account to season it
Even money you've been given by a relative or friend for your closing (gift funds) should be in your account for a few months before you try to buy a home. This ensures that the bank can not only verify its origins, but that it won't disappear at the last minute because someone changed their mind about helping you close on your home.