How To Avoid These 4 Mortgage Calculation Mistakes
Kali Hawlk
It’s difficult to buy that home for sale in Portland, OR, without taking out a mortgage. After all, not many of us have hundreds of thousands of dollars in cash sitting around just waiting to be spent. With the median price of homes in America resting right under $200,000, a home loan is the only option for most of us who want to own.
When we’re talking numbers like this, it’s no surprise that a mistake when trying to figure out how much house you can afford — and how high a monthly mortgage payment you can handle — can cost you big time. From failing to comparison-shop to forgetting about extra costs, it’s important to avoid these four mortgage calculation mistakes when buying your new home.
Not knowing your credit score
Not understanding your credit score is a big mortgage calculation mistake, because your credit score impacts the interest rate you’re likely to receive on your loan. And that interest rate can mean a difference of tens of thousands of dollars saved or spent over the life of your mortgage.
It’s tempting to give yourself a great interest rate when using mortgage calculators to estimate your monthly payment. But you may not be able to secure a 4% rate if your credit score is poor — which would mean your estimate could be very different from your reality.
Know your credit score and understand whether it’s good (and therefore likely to help you get a lower interest rate) or not. If your score is poor, take a step back from the home-buying process and work to raise your numbers first. Doing so can save you serious cash over the long run.
