How do I calculate my mortgage payment?
It's a whole lot easier to use a mortgage calculator like this one to figure out your monthly mortgage payment, but if you want to do it by hand, this is the formula:
The formula above will give you the basic mortgage payment, consisting of principal and interest. However, most modern mortgages are more than just P+I. They also usually include small payments you make toward other expenses that go into an escrow account and are paid on your behalf on a periodic basis.
A few examples of home expenses that can be included with your mortgage payment are:
You'll be informed prior to closing which of these items are part of your payment, and if they go into your escrow account. 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 Massachusetts
Massachusetts can be a very expensive place to buy a home, but the costs don't stop with your initial purchase. Taxes in Massachusetts are also quite high, ranking 21st in the nation. A homeowner in Massachusetts, on average, will pay 1.04% of their property's assessed fair market value in taxes each year. So, if your home is assessed for $338,500, you'll be giving the tax authority $3,511.
Massachusetts is among the states affected the most by climate-related temperature changes. In the last century, the state's average temperature has increased by more than two degrees Fahrenheit, causing changing precipitation patterns, which lead to more floods and droughts. Sea levels are rising, threatening to erode and overcome wetlands and beaches. Coastal storms are also an increasing threat for homeowners in cities like Boston.
Considering the cost of housing in Massachusetts and the severe shortage of listings, once you do have a home secured, it would be smart to look into both flood and wind insurance on top of your basic homeowners insurance. Depending on where you live, these may be relatively inexpensive policies at the moment, but could save you thousands of dollars in damage due to climate change related weather.
Ask your insurance agent about these options, then plug the figures that you get into the Massachusetts mortgage calculator to get a better estimate of your new house payment.
Tips for first-time home buyers in Massachusetts
MassHousing has two options for Massachusetts residents looking to buy their first home with down payment assistance. Both programs are in the form of a second mortgage. Depending on your income, you can qualify for up to $30,000 with a 0% interest rate.
Deferred down payment assistance
The deferred down payment assistance program in Massachusetts offers up to $30,000 as a second mortgage for eligible first-time home buyers. This loan is offered at 0% interest and has no payments required until you sell your home, refinance your mortgage, or pay your mortgage in full.
Amortizing down payment assistance
For other borrowers, an amortizing down payment assistance loan is available. This loan is capped at $25,000 and requires monthly payments for 15 years, but the interest rate is just 2%. It also must be paid in full if you sell your home, refinance your mortgage, or pay off your loan entirely.
Advice for all first-time borrowers
Even if you don't qualify for down payment assistance in Massachusetts, there are tons of great programs that can help you get into your own home with very little out of pocket. For example, a USDA loan might be possible further away from the bigger cities, or a VA loan is a great zero down payment option that you've earned as a member of the military.
No matter what kind of loan you end up with, you'll no doubt find more favorable terms if you present yourself as the best possible borrower you can. What that means is a little different for everyone, but here are a few things that underwriters look for:
- Continuous employment history. Keep that job you're in for at least two years, and if you must change jobs, try to stay in your same field.
- Great credit. You don't need perfect credit to qualify for a home loan, but it doesn't hurt if you do. Make all your payments on time no matter what.
- Low debt. Having a credit card and paying it in full each month is a great way to flex your credit muscles and also keep your debt burden to a minimum. After all, underwriters look at how much you owe compared to how much you earn.
- Seasoned savings. Sometimes, underwriters also want to know that your money is your own, through a process called seasoning. This just means that the money you intend to use to buy your house has been in your savings account for at least 60 days.
Depending on your financial picture, your lender may also ask that you have reserves on hand. This is money that's stashed away just in case you can't make your mortgage payment. Generally, reserves will be for the entire housing payment, including your escrowed bills (like property taxes), for anywhere from two to six months.
Whatever you do, don't open any new credit lines or charge up your existing ones while you're in the limbo between application and closing. This can change your entire credit balance and you risk losing your loan qualification.