How do I calculate my mortgage payment?
In this day and age, it's far more common to use a mortgage calculator like this one to calculate your mortgage payment than to do it by hand. But for the purists, the formula is provided below:
This formula will give you a basic mortgage payment that includes principal and interest on the loan, but not a payment that reflects the more common practices used today. However, you can use that figure as a base from which to calculate the rest.
Many mortgage payments today include additional fees and funds, like contributions to your escrow account. Your escrow account is a fund from which major yearly expenses related to your homeownership are paid at once, and into which you pay one-twelfth of each item monthly. It is a really handy way to ensure you don't accidentally forget to pay a really important bill.
Here are some of the most common items included with your mortgage payment:
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 calculate a close estimate of what you can expect for monthly costs.
Things to know before buying a house in Nebraska
Although Nebraska homes are generally priced well below the national average, its property tax rates are among the highest in the country. Nebraskans pay about 1.76% in property taxes on their home's assessed fair market value, putting them at 5th in the nation. For a home assessed at $123,300, Nebraska owners will pay $2,164 per year in taxes.
Nebraska has fared better than many states so far when it comes to climate change, but is still experiencing small temperature increases throughout most of the state, with the Nebraska panhandle seeing the most extreme changes. For most of the state, this likely spells more intense summer droughts and flooding, which tend to go hand in hand. Flooding in Nebraska also means rising river levels, which can increase damage to homes. The state is also prone to tornadoes, having more than 50 a year on average.
If you live near a waterway, you will want to look into insurance beyond a basic homeowners insurance policy, since flooding isn't covered by most policies. Even if your location has not historically been prone to flooding, this may change, so it's best to be prepared. Wind coverage is also a must-have for many parts of Nebraska due to the frequent tornadic weather. Ask your insurance agent what's appropriate, even if it's not required. You can also plug that number into the Nebraska mortgage calculator to help give you a better estimate of your overall payment.
Tips for first-time home buyers in Nebraska
Nebraska has programs available through the Nebraska Investment Finance Authority (NIFA) to assist residents in becoming homeowners. Here's a rundown of the two main programs, as well as links to find out more information.
Homebuyer Assistance Program
The Homebuyer Assistance Program (HBA) provides a loan for up to 5% of the sales price of a home that can be used for closing costs and down payments. This is a second mortgage with a 10-year term and 1% interest rate. Buyers will need to provide $1,000 of their own funds with this program and must income qualify. Home prices in non-target areas cannot exceed $384,000.
Welcome Home
The Welcome Home program, according to NIFA, is a down payment and closing costs assistance program for first-time buyers, but the details are scarce. It does say that buyers will need to participate in home-buyer education, and that the income limit is $160,000. Homes must be priced below $470,000, but how much assistance is available and in what form is less clear from the website.
Advice for all first-time borrowers
If you're a first time home buyer, there are many things you can do to make yourself look a lot better to a lender -- they're the ones that will decide if you can borrow a mortgage, after all. Lenders want to know that you have a solid job history, that you're responsible with credit, and that you have enough funds to provide a down payment.
You'll be asked about these factors, but then another layer of discovery is added during underwriting, where the underwriters literally verify everything you've told the banker. They will check for items like:
- Length of employment: Have you been in your job for two years? If not, were you at least in the same field for that period?
- Credit history: Do you pay your bills on time? Are you keeping your credit utilization low? How is your credit score?
- Debt to income ratio: How much debt do you have vs. your income? Is it a reasonable amount, even considering the mortgage?
- Seasoned funds: If you're bringing your own money to closing, is it money that you've had a while? They want to know the money is yours and not something that may be simply loaned to you.
These items are checked at least twice during your home purchase process, so make sure not to change your credit profile until after closing. No new credit lines, no unnecessary purchases, no job hopping. You'll be very happy you did when you have the keys to your new home in your hands.