You’ve learned a lot so far. At the end of it all, you’re likely still looking to lower that monthly payment. There are two options. Earn favorable adjustments by being a less risky borrower, or pay for discount points upfront.
Loan officers and lenders prefer less risk. If that’s you, you will earn an adjustment on the lender’s going rate, called the par rate, saving you money. Adjustments work both ways, meaning you’ll have a slightly higher rate to offset the lender’s risk in some situations.
Calculating monthly payments
When calculating your monthly payments, you will need: Sale price, loan amount or down payment, and interest rate. The sale or list price will be the total price of the home. The payment calculator needs to know how much of that value will be financed through a lender. The third puzzle piece is your hypothetical interest rate (not APR).
The bulk of your monthly payment will be the principal and interest you have calculated. There are other fees: Property tax, homeowners insurance, and private mortgage insurance. If you plan to live in a neighborhood with an association, add in HOA and maintenance funds. Not all costs will be part of your mortgage payment, but they must be covered.
Interest rates or APR
Mortgage interest rates come in eighths of a point, meaning the interest rate between 3-4% would look like: 3%, 3.125%, 3.25%, 3.375%, etc. All rates follow this formula. In the case of loan ads, you may see a lender’s annual percentage rate (APR), some may read 3.36% or 3.99%. This is your rate with closing costs, origination fees and other costs.
The Learning Center is an educational tool and the content is for information purposes only and is not intended to provide investment, legal, tax, or accounting advice, nor is it intended to indicate the availability or applicability of any Apple Creek Banking Company product or service to your unique circumstances. All examples are hypothetical and for illustrative purposes. Although we have obtained content from sources deemed to be reliable, Apple Creek Banking Company and its affiliates are not responsible for any content provided by unaffiliated third parties. You may wish to consult an appropriate advisor about your unique situation. The applicability of this information to your circumstances is not guaranteed. You should obtain personal advice from qualified professionals.