How do I calculate my mortgage payment?
There's a reason most people choose to use a mortgage calculator like this one to figure out their mortgage payment -- the process isn't simple. But, if you want to try your hand at it to get a feel for what the math looks like, we can help you with that. The formula for this is below.
Your basic mortgage payment, made up of just your principal and interest charges (often known simply as "PI" or "P+I") is the result at the end of this calculation. Although the payment is the same each month, the monthly allocation of interest and principal is different. With every passing month, you're actually paying a little bit more of your home off, since you're paying more principal and less interest, although it's the same sized payment.
Your payment is based on three simple things: how much you borrow, at what rate you borrow it, and for how long you need to pay it back. However, your actual monthly mortgage payment consists of more than just P+I, since many other things can be included.
Typical mortgage payments are composed of principal, interest, real estate taxes, and homeowners insurance, commonly called PITI. Sometimes, extra fees like HOA assessments are also included in the mortgage payment, as well as extra insurance for related natural disasters. Also, if you have a smaller than 20% down payment (like most Americans), you will likely also have to pay for mortgage insurance. You'll pay private mortgage insurance (PMI) on a conventional loan. For an FHA loan, the program is called mortgage insurance premium (MIP).
To calculate your new mortgage on this calculator 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 Delaware
Delaware has slightly lower than average real estate prices, compared to the national average, though some cities are significantly higher due to very limited inventory. However, if you can secure one of those few homes, you'll find that Delaware has fairly reasonable property taxes. The state ranks 38th out of 50 for a median property tax rate of 0.43% of a home's assessed fair market value, meaning that if your home was assessed for $249,400, you'd pay just $1,078 in taxes for the year.
Unfortunately, reasonable taxes may not be enough to offset the challenges that climate change may bring to the Diamond State. Delaware is projected to face higher temperatures, more high heat days, more heavy precipitation that could lead to more flooding, and sea level rise, which could affect real estate near the shoreline and beyond.
Flooding, hurricanes, winter storms, and tornadoes are common, and may increase during the time you own your home, so it's going to be important to get proper coverage beyond your homeowners insurance policy. Additional coverages like flood or wind will be important should your home be affected by these disasters, be sure to ask your agent what's covered and what isn't so you have all the protection you'll need.
Once you have those numbers in hand, you can plug them into the Delaware mortgage calculator to get an even better estimate of your future mortgage payment.
Tips for first-time home buyers in Delaware
The Delaware State Housing Authority (DSHA) has some options to help first time home buyers secure their first home in the state, available through their Kiss Your Landlord Goodbye website. Here's a rundown of the main programs.
Home Sweet Home
Home Sweet Home is a program with limited funding. Once the funding is gone, the program will end, but for the time being, this down payment assistance program offers $12,000 to qualified borrowers for homes under $285,000 that can be used for down payment or closing costs. It's in the form of a loan that's forgivable after 10 years.
Delaware Diamonds
Delaware Diamonds is similar to Home Sweet Home in that it is a limited program and offers $10,000 in down payment and closing costs assistance in the form of a forgivable loan. However, borrowers must not only qualify by income, but must be part of an eligible occupation that includes school employees, hospital employees, first responders, and others.
First State Home Loan
The First State Home Loan program offers eligible borrowers up to 3% of their loan amount for down payment or closing costs in the form of a deferred second mortgage. Borrowers won't be required to pay the principal unless they refinance, sell, or move, but interest payments may be required.
Advice for all first-time borrowers
Whether or not you qualify for a first time home buyer assistance program in Delaware, you can still apply for other loans with appealing terms for first timers, like FHA loans or conventional loans. Both have low down payment requirements, making them easier to secure, and can be used on a vast array of homes.
In order to qualify for any mortgage, you'll want to work hard to make yourself into the best applicant possible. Here are a few tips:
- Boost your credit score with on-time payments and low credit card utilization
- Pay off debt to improve your debt-to-income ratio
- Secure a steady job (or don't leave your current job)
- Save for both closing costs and your down payment
In addition, guard your credit carefully by not opening any new accounts or applying for credit too soon before your loan application. Each time you apply for or open a new credit account, your credit will take a little hit. Inquiries take two years to fall off your credit report, so plan accordingly.