How do I calculate my mortgage payment?
Using a mortgage calculator is the fastest and easiest way to calculate your mortgage payment, but if you're truly mathematically curious and want to do it by hand, try the formula below.
Mortgage payments, in the most basic form, are made up of principal and interest, which yields your P&I. But most mortgage payments today also have escrow accounts, which are accounts that banks use to help you save up for bigger yearly expenses like your taxes and homeowners insurance. That's why a standard mortgage payment is typically referred to as PITI -- it includes principal, interest, taxes, and insurance.
Other costs that might be included in your mortgage payment include:
Things to know before buying a house in Rhode Island
Rhode Island's real estate market is more or less in line with the larger U.S. housing market, though that could be changing. But for now, prices are still reasonable, but taxes are a bit on the high side. Rhode Island ranks 12th in the nation for property tax as a percentage of assessed fair market value at 1.35%. That means that if your home is assessed at $267,100, you'll pay $3,618 per year in taxes.
Climate change is also a concern for Rhode Island. It has warmed twice as much as the rest of the lower 48 states, which is contributing to a range of other problems, like earlier snow melts and increasing drought conditions. Rainfall from extremely heavy storms has also increased by 70% since 1958, which increases the risk of flooding both inland and at the coast, where sea level rise is creating further complications.
Due to increasing issues with flooding, it's a good idea to get flood insurance along with your homeowners insurance policy, even if your home isn't in a listed flood zone. Your insurance agent can help you better understand your risk and give you a price for different types of coverage. Add that number to the Rhode Island mortgage calculator to help give you a better estimate of your overall housing payment.
Tips for first-time home buyers in Rhode Island
Rhode Island has first-time home buyer assistance available through RIHousing. There are three programs: Extra Assistance, 15kDPA, and FirstGenHomeRI.
Extra Assistance consists of a second mortgage on your property, much like many other states' assistance programs. You must income qualify for the assistance, which is based on your household size. For example, a household of up to two people cannot have more than $134,320 in yearly income.
You'll be eligible for up to 6% of your home's purchase price, or $15,000, whichever is lower, with an interest rate on your second mortgage that matches your primary mortgage loan. There are no additional fees or charges, but you're expected to repay your assistance monthly.
15kDPA
The 15kDPA is exactly what it sounds like: a $15,000 down payment assistance loan. Unlike the Extra Assistance program, the 15kDPA is a 0% interest rate loan with no payments due until the home is sold, refinanced, or is no longer occupied by the original borrower, at which time the entire amount borrowed will be due.
Buyers will need to complete a home buyer education program in order to meet eligibility requirements.
FirstGenHomeRI
First-generation home buyers in Rhode Island may also qualify for $25,000 in assistance with down payments and closing costs under the FirstGenHomeRI program. This is a five-year forgivable second mortgage with no payments due and no interest. You will have to complete home buyer education to qualify, live within the program's targeted ZIP codes at the time of application, and income qualify for this program.
Advice for all first-time borrowers
Even if you don't qualify for one of the down payment and closing cost assistance programs in Rhode Island, there are other great low-to-no down payment mortgages available for first-time home buyers. You'll need to make sure you're presenting the best version of your financial self possible, though.
If you can, start years before you're ready to buy, and focus on factors like:
- Consistent employment with at least two years of job history at the same place.
- On-time payments for all of your bills and no collection accounts.
- A closing fund for your home that's in a dedicated account so the bank can verify it.
- Maintaining low balances on your credit lines or paying cards off in full each month.
Once you're approved and you've got your house under contract, guard your approval viciously. Don't open new credit lines, spend from your down payment account, increase your debt on your existing credit lines, or quit your job until after closing. Your underwriter can still revoke your approval up to closing day if there are too many differences in your borrowing profile.