Mortgage Banker
Richard Blair
Published on October 26, 2021


For many first time home buyers the first thing they to begin the home buying journey is to plug and play on an online mortgage calculator. Have you started plugging in mortgage amounts and interest rates to determine a monthly payment? This is a common mistake and often results in shock and surprise to the home buyer later in the home buying journey. If you want to avoid this costly mistake follow the four tips in this article.

Verify my mortgage eligibility (May 20th, 2022)

If you have not experimented with a mortgage calculator it would be helpful to click this link to my Team’s calculator so you are more familiar with what a calculator can and cannot do.

A mortgage calculator allows you to plug in a mortgage amount and an interest rate until you find a monthly principal and interest payment that meets your budget. So, once you plug that in the calculator you will be ready to start your home search…Right?

Verify my mortgage eligibility (May 20th, 2022)

Using an online mortgage calculator is a great tool, but only AFTER you are pre-qualified for a mortgage by your local mortgage broker or mortgage banker.

For more information on how to select the best local mortgage originator for your mortgage pre-qualification here is a great blog article.

Here are tips to avoid 4 mistakes when using an online mortgage calculator.

Verify my mortgage eligibility (May 20th, 2022)

Not Knowing Your Credit Score – A big mortgage calculation mistake often occurs if an incorrect interest rate was plugged into the calculator. How will you know what interest rate to use if you do not know your mortgage credit score?

Interest rates are determine by many different factors, such as:

  1. Your Credit Score
  2. The Loan Program (Conventional, FHA, VA, USDA)
  3. The Down Payment
  4. Type of Property

Interest rates will be different depending upon the loan program and also between mortgage lenders.

Verify my mortgage eligibility (May 20th, 2022)

You may put in an interest rate on the mortgage calculator because you saw a national average on a news broadcast. But if you have a lower credit score you may not be able to qualify for that rate. Rather than guess on an interest rate it will be best to take the first step in your home buying journey and ask your mortgage originator to review your credit.

Remember that if you are monitoring your credit score through consumer sites, like Credit Karma, this score can be different than the score used in mortgage reports. Credit Karma utilizes a consumer score and a different scoring model than mortgage lenders.

Using an incorrect consumer score in the calculator may give you false hopes and lead to disappointment. If that score is substantially higher than the score pulled by the mortgage lender then the interest rate can also be different.

Verify my mortgage eligibility (May 20th, 2022)

Choosing the Best Loan Program For You – It is impossible to plug in an accurate interest rate into a calculator if you do know for sure which loan program will best fit your goals. Interest rates will vary between loan programs and among mortgage lenders. With same credit score and down payment the interest rate can be different between conventional loans and government loans, like FHA, VA, and USDA. If you are seeking a down payment assistance program the interest rate is set by the granting authority, not the mortgage lender.

To avoid costly mistakes using a mortgage calculator too soon in your home buying journey ask your mortgage originator for a custom home loan analysis. After thoroughly reviewing your loan application, credit report and financial documents the loan originator can prepare an analysis of all available loan options to meet your personal financial goals.

Ask your loan originator to review the pros and cons of each loan option. Review a side by side comparison on how each loan option will compare based on your personal goals. This is far more productive than using a plug and play loan calculator to make one of the most important financial decisions of your lifetime.

Verify my mortgage eligibility (May 20th, 2022)

Using Inaccurate Information – A mortgage calculator can be a great tool when used correctly. However, the information displayed by the mortgage calculator is only as good as the numbers you plug in to the system.

Your monthly mortgage payment can include the following: repayment of principal, interest, real estate taxes, home owners insurance, mortgage insurance and flood insurance.

If you are using a mortgage calculator and using that calculation to shop for homes it can prove to be a big mistake and cost you time and money. If you fail to account for any of these costs, or calculate one of the costs incorrectly, this can result in a big calculation mistake on your monthly payment. No one like this kind of surprise.

Verify my mortgage eligibility (May 20th, 2022)

For example, you may fall in love with a property but know know it is a flood zone requiring special insurance. If you do not include it in your calculator you may be making an offer on a home you really cannot afford.

Your mortgage lender should be able to provide guidance on what to expect for real estate taxes when estimating monthly payments. Insurance can vary depending on the subject property and your previous claims history. It is also a good idea to speak with your insurance agent when you start the home buying journey to get additional information on what to expect for insurance costs.

Mortgage Rates Change Daily – As discussed earlier in this article, mortgage rates will vary based on several factors. In fact, interest rates can change daily, or even during the same day. Mortgage interest rates are driven by certain financial markets.

Verify my mortgage eligibility (May 20th, 2022)

If you base your entire home buying strategy on the monthly payment from a mortgage calculator it can be very risky. Rates can climb up or go down in any week, so your calculation is only good for the day that you run the information.

Using the “lowest rate” that you find on the internet for your mortgage calculator can provide very inaccurate information for your home search. That is because mortgage rates advertised by some internet lenders can be confusing to understand, The lender may advertise a low interest rate , but when you read the fine print there can be additional, and substantial, closing cost to choose that rate.

Carefully check the fine print disclaimer in the advertisement. The advertised interest rate may be restricted to a certain credit score, like scores over 760, or require a 20 percent down payment.

Verify my mortgage eligibility (May 20th, 2022)

Is there a time when a mortgage calculator can be used safely for your home buying journey? The answer is “Yes.” For example, my Team offers access to an interactive mortgage calculator that is customized to your preapproval. After your loan is preapproved by underwriting, the parameters of your loan approval are entered into the calculator with the daily interest rate, so you can safely run calculations of different homes you may be interested.

Educate and Empower Yourself to Make Wise Decisions

Before jumping to a mortgage calculator and starting your home search it is best to hit reset and focus on education first. Start by choosing a local, experience and trust local mortgage originator that will take the time to educate you and answer questions. Read reviews of other home buyers, like yourself, that have worked with the loan officer or mortgage lender. An educated home buyer will be empowered to make wise financial decisions concerning their mortgage. This will guarantee that you will choose the right loan program with a competitive interest rate and help you avoid costly mistakes. A great mortgage loan originator will be with you every step of the home buying process, communicate effectively and guide you even after the transaction has ended.

Verify my mortgage eligibility (May 20th, 2022)

About the author: Richard Blair (NMLS# 213176) is a mortgage loan originator with 24 years of lending experience that combines the personal touch with cutting edge technology for an amazing experience. Richard is part of the dwell Mortgage Team at Victorian Financial

Show me today's rate (May 20th, 2022)
Mortgage Banker
Richard Blair Mortgage Banker
Click to Call or Text:
(480) 542-1085