Q&A: Can someone please show me the math for how they work out a monthly mortgage payment?

Posted on Mar 13, 2013 in FHA Information

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Question by Cc1: Buying a home good and bad credit.?
Hello, pill
I have a question in regards buying a home in Central Florida. My credit is bad is in the 520 b/c of some student loans and credit card. Yes, I acted irresponsible but I am trying to get things back in to place I am paying my student loan now. Anyways the point is that my husband has no credit problem he pays everything on time and his credit score is high but mine is not. Is there a way that we can buy a house together or no? He doesn’t make enough to buy the house that we want so he needs me as another source or income. Would that be possible or no? Thanks in advance for the info.

Best answer:

Answer by cjrossi
Your name and your income being included on the application will require your credit score to be considered as well. They’ll weighted-average you and your husband’s scores, and 620 is the minimum to even be considered. How they weight it can differ from lender to lender.

Should you be approved, you’ll be saddled with a high interest rate.

If at all possible, maybe lower your sights to something he can qualify for with just his income. If his credit score is great, you’ll get a great interest rate, and this makes a HUGE difference, not just in the long run, but even your monthly payments.

ADD: with respect to the answer that refutes mine, keep asking around, including from reputable sources on the internet.

What do you think? Answer below!
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Answer by MadMan
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Question by Fozzieb001: Use of a FHA 203k Rehab loan?
I am a first time home buyer in the Seattle area. I have been looking at older homes within the city but the ones that are in my price range are “Fixer-Uppers”. I have been reading about the 203k rehab loan and have some questions. For these questions I have been using the following criteria: House – asking $ 230k, viagra 60mg 4bd, information pills 1 bth, order 1500sqft, 1200sqft unfinished basement. Will need kitchen update, flooring update, addition of another bathroom, paint in & out and basement finished. Other houses in the area (within 2 miles) that are similar in sqftage and improvements have been assessed for $ 450K+

Will a 203k cover these improvements?

If approved for $ 250K and purchase at $ 230k; How much more can be borrowed for the rehab? What is the basis for the dollar amount for the rehab portion of the loan?

What does this increased amount of $ $ $ do for the monthly payment, Percentage rate, closing costs/fees?

I know that I am considered a “First Time Buyer” and maybe not that well educated on this type of loan. From what I have read I am under the impression that (if approved): You purchase the home with the 203k rehab, Hire a contractor to make the improvements, then move in to a livable,newly updated home. Is my head in the clouds??

Thank you for any and all input!

Best answer:

Answer by mortgagequeen
No, your head is not in the clouds…203(k) loans are great!
To answer your questions…
1) Yes,a 203(k) loan will cover the improvements mentioned
2) The amount that can be borrowed on these loans is the lesser of three things.. a) the cost of the improvements b) 110% of the value of the house after the improvements are made; and c) the amount of a mortgage that you qualify for. So in your example, I am going to assume that it will cost $ 50,000 to make these improvements and that your home will then be worth $ 400,000. Using a) you could borrow 280,000 (minus your 3.5% down payment investment, you still have to put that money down on all these examples). Using b) you could borrow 440,000 and using c) you could borrow 250,000. The lower of these 3 is $ 250,000 so you could do a 203(k) loan and get about $ 20,000 for repairs. You can never receive more than you are qualified for. In this example, you may have to do less work than you initially wanted to.
3) Your monthly payment only increases by the additional amount that you are borrowing. Generally the rate is a little higher – .5% to 1%. Sometimes I find that they are priced the same. Usually not though. We generally charge a little extra on these loans since there is a lot more work for the lender to do on them. Nothing extraorbitant though.
4) You’ve got it right for the most part. You put an offer in, it’s accepted, your lender hires a 203(k) cost consultant to look at the house, go over your plans with you, and write up the cost to make your repairs. The loan closes and your contractors make the changes and you move in.
Good luck! Let me know if you have any other questions.

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Question by meky_1: What is the Difference between Fannie Mae and FHA loan?
What loan is better Fannie Mae or a FHA loan?

Best answer:

Answer by If you only knew
The Federal Housing Administration was created as an effort to bolster homes sales during the Depression. By financially guaranteeing loans, pill the FHA lifts much of the risk of non-payment and foreclosure from private lenders. It is important to remember that the FHA is not a lender; they just guarantee your loan.

Advantages to FHA Loans:

Bankruptcy not an automatic disqualification. In an effort to afford more people, ask the opportunity to use this type of loan bankruptcy is not a disqualifier. The bankruptcy must be two years old and you must have good credit since then. Less stringent credit requirements. Instead of looking solely at your credit report, ed the Federal Housing Administration looks at what they call the “total scorecard”. The total scorecard allows the FHA to better assess and manage the risk of a given loan.

Lower interest rates. Normal subprime lenders have employed much higher interest rates in order to compensate for the increased risk of the loan. Because FHA loans are guaranteed, there is substantially less risk for the lender and therefore interest rates are lower.

Down payment is required. While many might see this as a disadvantage, making it harder to afford a home, it is also an opportunity. Because a down payment is required, the principle on the loan is less. This means there is less interest charged along the life of the loan. Together these both mean that the loan will be paid off that much quicker.

A FHA Loan is an excellent option for someone in an urban or rural environment who is considering purchasing a home and would like to make a low down payment. The FHA is fairly lenient with credit, though requirements may vary by state. You can apply even if you have no credit history if you can prove that you have met past financial obligations.

Things to remember about FHA loans:

Any past bankruptcy must be at least 2 years old and the applicant must have had good credit for at least 2 consecutive years following the bankruptcy.

Any history of foreclosure must be at least 3 years old and followed by at least 3 consecutive years of good credit.

You must have had a stable income for at least 3 years and proof that you have paid all your bills.

You must be able to make a 3% down payment, which is considerably lower than conventional loans.

There is a 2.25% closing cost, and monthly payments must be roughly 30% of your income.

You can assume a FHA loan from a seller or pass it on to a buyer.

Any cost associated with the title, including the title search and title insurance for the home.

There are also eligibility requirements for the home. Properties that are eligible for a FHA loan include single-family homes, 2-4 unit properties, condominiums, doublewide manufactured homes and modular homes. Ineligible homes include (but are not limited to) co-ops, boarding houses, commercial properties, hotels, and private clubs. A home is also ineligible if the seller acquired the house within the past 90 days. For any property over 10 acres, the loan will be based on the price of the house and the first 10 acres only. Additionally, the property must be used as a primary place of residence.

One type of FHA loan that has a couple of other specific guidelines is the 203(k) loan, which is used for buying and remodeling a home. The home must be at least 1-year-old and the rehabilitation of the property must cost less than $ 5,000.

If you meet the above requirements, you are well on your way to qualifying for a FHA home loan.

Fannie Mae is an investor. They buy the loans from the bank as soon as they are funded. Their “guidelines” are what the bank follows when underwriting your loan. In order for a loan to be able to sell in the secondary market, the loan must meet or exceed Fannie Mae’s guidelines to do so. They are partially government aided and partially public responsibility. They are a financial investor, not a bank. They regulate the conforming loan market along with Freddie Mac.

The difference between Fannie Mae and FHA is FHA is a loan program that is guaranteed by our government. If you default on your loan and it goes to foreclosure, the bank uses the insurance the government provided on the loan to retain the remaining balance of what wasn’t collected at auction when the county you live in sells it after taking possession.

Fannie Mae buys the interest rate on the Note in the secondary market while the original lender, not Fannie Mae, retains the servicing rights i.e. collect payments, refinances, and customer service issues.

Hope this helps

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Question by followingmybliss: Should we threaten to give our building back to the bank?
Even though my sister and I have top credit scores and income, dosage we can’t convince one bank to refinance our commercial building. They come up with one lame excuse after another.

So, I’m wondering if we should just threaten our bank with getting the building back. We owe less than its worth, and wonder if that would simply backfire and they’d take it.

Help. We are so tired of paying a high interest rate and not finding one bank to refinance.

Best answer:

Answer by knowitall
Why do you think that is a threat? Not only will they take it, they will sue you for what you owe them on it.

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Question by royalbird: Can someone please show me the math for how they work out a monthly mortgage payment?
No matter how I try to calculate it, abortion with interest, order even with escrow and homeowner’s insurance wrapped up, for a fixed rate 30-year-mortgage, I always get a way lower number than the bank. Where are they getting all the extra stuff that they add on? I just don’t understand. Could you please do a sample 30-year-fixed at 6% with all the math shown?

Best answer:

Answer by rtfm
Just google “mortgage calculator” and you’ll find dozens — probably hundreds — of sites that will run those numbers for you, and you can see whether the results agree with you or with the bank.

Give your answer to this question below!

4avg.rating 17 votes.


  1. Maybe the banks are having you pay PMI. Private Mortgage Insurance. If you don’t have 20% down, that is probably what it is.

  2. On a 100,000 loan P&I payments @ 6% would be: 599.55 or $ 6/thousand to estimate other loan amounts (good luck finding 6% without some good points).

    Then you have to add in real estate taxes. On 100K, mine are $ 2,000/yr, but this varies widely from one area to another. Divide by 12 to get monthly or about $ 167.00.

    Then you have home owners insurance. Mine runs $ 730/yr or $ 61/month.

    Then you may have PMI if you borrower more than 80% of the value of the property. It could be .37% at 85%, .52% at 90%, .78% at 95% or .96% at 97%. FHA is about .55 at 97.75% on a purchase. These are annual factors. FHA premium on 100K would be about $ 46 monthly.

    Add it all up:

    Total PITI = $ 874 roughly.

    I hope this helps.

  3. Step 1. Determine your periodic rate, Pr. For a monthly payment, that simply means dividing the annual interest rate (as a decimal) by 12. For instance, the monthly periodic rate for a loan with an interest rate of 6% is: Pr = .06 / 12 = .005

    Step 2. Add 1 to that number, or Pr + 1. In this case 1.005

    Step 3. Raise that number to the power of the total number of months. DON’T GET SCARED; it’s not that bad. Your scientific calculator should have a y^x button. That would be a y with a small x on the upper right hand side of it.

    So, if it was a 30 year mortgage, the number of payments would be 360. You would enter 1.005, hit the y^x button, then enter 360. The answer should be 6.022575212

    Step 4. You can either write that number down, or store it in memory #1, if your calculator supports that.

    Step 5. You next want to subtract 1 from that number, so that would be: 6.022575212 – 1 = 5.022575212

    Step 6. Divide the smaller number into the larger number:
    6.022575212/5.022575212 = 1.19910105

    Step 7. Multiply 1.19910105 times the amount you want to borrow. Let’s say it was 100,000, it would equal 119,910.105

    Step 8. Multiply 119,910.105 times the periodic rate Pr:

    119,910.105 * .005 = 599.55
    $ 599.55 would be your monthly mortgage payment for a $ 100,000 loan for 30 years at 6% annual interest.

    Step 9. In equation form, it looks like this:

    Payment = (Pr+1)^#pmts. /((Pr+1)^#pmts.)-1) * Pr * Amount borrowed.

    I wrote this exact example over at eHow, with a little more information added.