For real estate investors, it can be difficult to predict how the housing market is going to change, which can make buying, renovating, and selling an investment property a very risky business. With the housing slump, it seems that the consequences of investing could become more extreme as the market either worsens or improves drastically. What can seem like cheap homes for sale now can turn into overpriced homes within a couple of month’s time. To get some bearings on this delicately balanced subject, some trends in housing values are discussed below.

Home Value Statistics

According to CNN’s Fortune and Money reporters, the national median home price is expected to rise at a rate of about 4% by the year 2012. This seems like good news for investors as long as they’re willing to wait until 2012 to sell, but most predictions indicate that prices will fall before they rise.

For example, between now and the first quarter of 2011, home prices in the Detroit-Livonia-Dearborn area are expected to fall by 5.5%. When they rise by 4% in 2012, home prices will still have fallen 1.5% from their current levels. The calculated change in Detroit area home prices between the 2008 and 2009 third quarters is a fairly drastic plummet at 18.2%, which indicates that the values will continue to fall for some time. Between July and August of this year, home prices in Detroit have fallen from $62K to $57K while the market has become more saturated with listings.

These statistics may not encourage real estate investment in the near future, but for those who are feeling lucky, here are some potentially profitable buys.

Cheap Homes for Sale in Detroit, MI

2460 Atkinson, 48206 is a foreclosure that offers three bedrooms and one bathroom for $14,900. The third floor and basement are both unfinished, allowing for significant improvements that could raise the value of the house.

This foreclosure at 6475 Rutland St., 48228 has three bedrooms and one bathroom for $2,000. It includes a generous amount of front yard property, a large front porch, and a basement.

Located at 7351 Bramell, 48239, this foreclosure includes two bedrooms and one bathroom and is going for $7,810. It includes a two-car garage, large backyard, and hardware floors. With some exterior improvements like paint or siding, it could be made more appealing to buyers.

How to Find Cheap Homes for Sale in Your Area

There are several options for finding cheap homes for sale locally:

• market listings
• real estate agents
• public auctions
• private sales
• and wholesalers like public agencies

Websites like auction.com allow investors to search for events by state, at which point they can be sorted by county, city, and asset type. They’re listed by auction start dates, so it’s easy to determine when an auction might be a good event to attend.

Recommended reading: An Auction Experience to Remember by Madison at My Dollar Plan.

For an example of a market listing website, realestate.com is a good place to start. Searches enable investors to refine their results by property type, city and state, zip code, price, number of bedrooms or bathrooms, or a home’s status as either existing, new, foreclosure, or rental. With comprehensive tools like these, it can be easy to find cheap homes for sale.

Alexis Bonari is a freelance writer and blog junkie. She often can be found blogging about education and scholarships for college. In her spare time, she enjoys square-foot gardening, swimming, and avoiding her laptop.

photo by respres

Cheap Homes for Sale: Finding Local and Lucrative Real Estate Investments is a post from: PT Money: Personal Finance by PT.

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I spent 10 years as a renter. I rented houses, several different apartments, and a town home. I have to say I’m glad I rented throughout that period of my life. I just wasn’t settled down enough to buy, even though financially I could have purchased a home earlier, given the lending standards at the time.

If you are a renter, have no shame in not being a home owner sooner. There’s more to owning a home than just the ability to make a monthly payment. A lot of other things have to line up. But that’s another topic for another time. What I want to discuss today is being financially ready to rent, as well as some general financial tips for renting.

Maintain Good Credit – Most shrewd landlords are going to run a credit check on you before they let you in their place. Therefore, it’s important to show a clean credit history (free of defaults) and a good credit score. If this is your first time renting, you may want to do a quick check of your credit score and / or credit reports before you fill out an application so you’re not blindsided. If you have some dings on your credit, you may have to search for an apartment that doesn’t do credit checks, or you may have to fork over a bigger deposit and upfront rent.

Prepare for Deposits – Even though you don’t need a big down payment as a renter, you do usually need at least a security deposit (in case you leave the place in shambles), and sometimes even prepay first and last months rent. So, depending on the place you are renting, you could need anywhere from $500 to $5000. So start saving and be ready for the big cash outlay.

Research the Rental – Like any financial transaction, there is no guarantee that the person on the other side is going to hold up their part of the bargain, or that they place is what they say it is. There’s a myriad of things that could go wrong with your place: you could have bed bugs, bad neighbors, a landlord who won’t fix anything. This is why you should do your due diligence and help to ensure you’ll be getting into a good situation. If it’s an apartment, visit apartmentratings.com and see what others have to say about the place.

Negotiate Upfront – Before blindly accepting their asking price for the rental, feel them out and see if they are willing to negotiate. Ask for a lower monthly rent, less of a security deposit, or ask to get your utility bills covered. Finally, see if there are any repairs or improvements to the place that you could do in exchange for lesser rent. The bottom line is to negotiate.

Know Your Lease – Before you sign your lease, make sure you understand it. Ask to read over it before hand so you’re not pressured to sign quick in front of the landlord. Look for any rules or regulations that might cost you. And pay special attention to the early termination clause. If you have to break the lease, it could mean an obnoxiously large fee.

Look for Alternatives – Something that I didn’t do enough of in my renting history is look for alternatives to the big apartment complexes. You can just as easily rent small homes, garage apartments, even the guest bedroom. These may be a more comfortable fit for you and you may find a better financial experience than the one-size-fits-all treatment of the apartment complexes.

Get Renter’s Insurance – It’s a good idea to get some renter’s insurance. Very cheap, and can usually just be tacked onto an affordable auto insurance policy. Even if your stuff isn’t that valuable, renter’s insurance can help you out if someone, for instance, gets hurt in your home and tries to sue you.

Use Movable Decor – Finally, when you move into your place and decide to spruce up the place, focus on decor that you can take with you. Think lamps, rugs, plants, etc. And if you decide to paint, remember to check your lease and run it by the landlord. They may cut your rent for the month for the new paint job.

Do you have any money tips for renters? Leave them in the comments below?

photo by turkeychik

8 Great Financial Tips for Renters is a post from: PT Money: Personal Finance by PT.

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I love the idea of owning several real estate investment properties and living off of the cash flow from the rental income. But while I love the thought, I’m not so sure I’d actually like the things that go along with owning investment properties (e.g. tenants, maintenance, etc.). Over the weekend I did some reading about starting up real estate investing, and I also had a discussion with a successful real estate investor. Here are some of the thoughts I have as a result of my research.

Shoot for 10% Return on Investment

If you’re going to take on the risk of owning property, you need to have a shot at getting a very nice return. After all, I know most of us aren’t lucky enough to have $1M sitting around in cash just waiting on the right investment property. Most people getting into real estate usually have enough extra cash for one unit. Therefore, if you’re going to tie up a bunch of your cash in one place, you better be getting a solid return. Enough of a return so that if something goes wrong, you can still get by with a lesser return.

In his latest book, The Skinny on Real Estate Investing, Jim Randel suggests only dealing with investment properties that can produce at least a 10 percent return on your investment. As an example, let’s say you are looking at a piece of property that will provide $20,000 in rental income annually. Given that you have expenses (taxes, insurance, maintenance, misc.) of $5,000, you will have a net operating income of $15,000. Given this NOI, you should only expect to pay $150,000 cash for this property. Any more than that and you run the risk of problems with this property infringing on your ability to make a decent return (above 7%).

Of course, when you factor in financing on this property it changes the numbers in your favor (especially with today’s mortgage rates). Sometimes the leverage you get from borrowing is enough to dramatically increase your return. But it also makes the entire transaction more complicated and stressful since you are now taking on debt, in my opinion.

I like the 10% approach. It’s really conservative and it helps take the emotion out of the decision to buy. If the numbers add up, then you are free to pull the trigger. If not, then it’s easy to walk away. I would bet that there aren’t a lot of 10% properties in my neighborhood. These types of properties are hard to find. But that’s what makes them a good investment.

Look for Investment Properties Where You Can Add Value

Can You Add Value?

When I spoke to the successful real estate investor, he shared with me how he was adding value to one of his current properties. He purchased a plot of land on the corner of a couple of main roads in his town. The property was in a floodplain, so it was basically useless. However, he told all the local construction companies that they could begin dumping their unwanted earth and concrete on the land. In a year’s time, this former flood zone had become a nice piece of property using this free material. He is now contemplating placing a gas station on the land given it’s central location.

The jury is still out on whether he can make this work. But I was impressed at his ability to take something that most people saw as useless and turn it into something of value by using free resources.

The lesson to be learned here is to find properties where you can add value. Is there an extra space that could be rented out on the property? Are there small, low-cost improvements you could make to the property to increase the rent?

::

Obviously there is so much more to think about when it comes to investing in real estate properties (e.g. how to evaluate potential rents, how to find good tenants, do you use a management company, etc.). But I liked these two takeaways because they force you to evaluate the property from a strategic perspective upfront.

What do you think? Would you ever like to own rental property? Do you currently own some? If so, what do you like about the process?

Should You Buy a Real Estate Investment Property? is a post from: PT Money: Personal Finance by PT.

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Today, with the real estate industry trying to recover from the shambles it was in a year or so ago, it’s no surprise that the mortgage short sale is more the norm than the anomaly. For those who are in the dark, this process is a face-saving measure for homeowners who owe more in terms of mortgage than their home is now worth, who are unable to meet mortgage payments on their home, and in danger of foreclosure.

When you choose to short sell your home, your lender is in essence forgiving a part of your loan; a buyer who is willing to pay the amount the lender sets is found, and your home goes from your hands to theirs.

The mortgage short sale is a win-win situation for all concerned – the buyer gets a home at a reduced price; the lender, while losing out on some money, gains because they are spared going through the long, drawn-out and expensive process of foreclosure and then having to find a buyer for the home; and you as the seller are saved the embarrassment and humiliation that comes with having your home foreclosed.

Short sales are not for everyone, so whether you’re a seller or buyer, here are a few points you need to know before becoming involved in one.

Mortgage Short Sale Tips for Sellers

Too Many For Sale Signs?

• Ensure that you qualify for a short sale first.
• Talk to a real estate lawyer so you understand what you’re in for.
• You can begin a short sale even before you’re in default if the current value of your home is less than the amount you owe.
• Remember that a short sale can be initiated even a few minutes before your home is up for a foreclosure auction.
• Check if you should do a short sale through a preliminary net sheet – this estimated closing statement tells you whether a short sale is a good idea or not by taking into account the unpaid loan balance, outstanding payments, late fees, cost of the sale, real estate commissions, and other costs. If you as a seller are left with some cash at the end of the calculations, then it’s not wise to sell.
• If you have a second mortgage on your home, you cannot sell short without dealing with it first – if the lender is the same, maybe the short sale proceeds can be distributed over both mortgages; if it’s a different lender, you could buy out your loan without paying any interest you owe if the lender is agreeable (most of them agree to avoid a total loss), or if cash is a problem, you could ask them to release the loan after signing a note for the repayment of a percentage of the loan. Either way, the second mortgage has to be addressed before you do a short sale.
• Lenders may not allow you to do a short sale if you’ve neglected paying your mortgage to finance other assets or if you’ve spent money indiscriminately.
• You will have to provide a detailed copy of your list of assets and liabilities and your bank statements.
• Any large withdrawal in cash is likely to be questioned by your lender to check if you’re scamming them into a short sale for any reason.
• Your debt forgiveness is taxable, so you may incur tax on the amount you owe your lender but are not paying because of the short sale. So talk to your accountant or a real estate lawyer to work out the amount of tax you owe and if it’s worth it.
• Your credit report will be affected if you go through a short sale – while it’s not as bad as a foreclosure record, it will show a pre-foreclosure that has been redeemed.
• Remember that a short sale can only go through if you have a buyer willing to take your house off the market. The buyer and the lender must agree on all terms and be in agreement for your short sale to be completed without a hitch.
• And finally, your lender can pursue you for the amount that you still technically owe them if it is allowed by state law. So before you sell short, get a written agreement from them that your debt is forgiven and that you don’t have to pay back the amount you owe on your mortgage.

For more seller tips, check out this video from the Dave Ramsey show…

Mortgage Short Sale Tips for Buyers

• Ensure that you go through a trusted real estate agent so that you don’t get scammed or cheated.
• Never pay the seller outside of closing – not only is it illegal, you also set yourself up for additional tax liabilities by doing so.
• Ensure that there are no liabilities on the home; a second mortgage that is outstanding and hasn’t been dealt with should be taken care of by the seller before you close the sale.
• Before you decide to buy, check public records to find out who owns the title to the home, whether a foreclosure notice has been filed, and how much the seller owes to the bank. This helps you decide how much to offer and how high a price you should pay.
• If you need financing, be sure to check current mortgage rates and find a solid lender.
• You may have negotiated terms with the seller; even so, unless the lender too is in complete agreement, problems may keep coming up during the sale. In a short sale, the lender takes over the role of the seller, so they are responsible for agent commissions and other costs associated with the seller in a real estate deal. The lender may refuse to pay your pre-decided agent commission, in which case you may have to pay the difference out of your pocket. They may also refuse to pay for termite inspections, home insurance, minor repairs and other buyer credits. So be prepared for further negotiation to get all these included in the terms of sale.
• Don’t buy a home without having it inspected first for pests and other maintenance faults.
• And finally, remember that while a short sale could close in as little as 30 days or less, the majority of these transactions take months, even up to six, to close. So if you’re really interested in the home, do your homework and be prepared to wait it out.

This guest post is contributed by Omar Adams, he writes on the topic of online accounting degree. He welcomes your comments at his email id: omaradams47@gmail.com.
Photo by TheTruthAbout…

Mortgage Short Sale: Tips for Buying and Selling is a post from: PT Money: Personal Finance by PT.

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I received an email recently from a reader with questions about her housing situation. She offered to lend her story to the blog in exchange for a few answers from other readers. If you have some insight on what she should do, I encourage you to leave your response in the comments below…

We bought our condo in August of 2007, when we thought the market had gone down basically as low as it was going to to. Our original limit was about 300k but after looking at a million condos 300k wasn’t going to get us what we wanted. We ended up finding our place, one of the best we had seen, and it was $360k. So, we jumped in – feet first (probably would have been better to jump in head first, might not be stuck now. )

So, now, almost 3 years later our tax assessor has decided our property is now only worth $195k. That’s insane! There are some other condos selling in our complex for $200-$225k but still, really low compared to what we paid for ours.

We have 2 loans – a fixed at 6.5% that’s around 300k, and then the 2nd is at 10%!! and that’s a 15/1 arm.

We’ve made some improvements – painting, crown molding, recessed lighting, ceiling fans, etc, but nothing that’s going to make up the difference. It’s a 3 bedroom 2.5 bath, 1300 sq foot, 2 story condo in a complex with 3 pools, tennis courts, and a million trees (in case that’s important). On top of our mortgage we pay $240/month in association fees.

The condo is fine, for a family of 3. But we’re about to be a family of 4. Not that babies take up that much room, but baby stuff does. So, on top of the fact that we are now paying way more a month than our place is actually worth, we are cramped (or we will be in the coming months). It’s hard to swallow making the monthly payments when you know you’re basically throwing money away.

I’ve contacted our mortgage rep and he gave me three options. (Keep in mind we both have really good credit at this point so we don’t really want to take our chances of screwing that up.)

1. Refinance now that rates are lower. On the face of it, we could save ourselves $200/month if we refinanced our current mortgage. But, we would have to pay the closing costs, or roll them into the loan. If we roll them into the loan we take the savings down a little bit.

We also now, according to CA law, carry condo insurance – basically protecting the “stuff” inside since the association pays for the insurance for the building. So, that brings us down a little lower.

And finally, now because we don’t have enough equity we have to impound our taxes, which we currently don’t do because I don’t like the idea of the bank holding on to my money instead of me. So, I think refinancing to a lower mortgage rate would maybe save us $150/month, maybe.

2. Short sell and rent for the next few years. This could take any number of months, and we wouldn’t be able to buy from Wells Fargo again for 10 years or buy period for another 2-3 years. But we could rent a house, a bigger house, and not have to worry about all the home maintenance.

3. Rent our place out and rent a house for ourselves. This would give the market some time to rebound before we sell, and apparently we could buy again after having rented for a couple years, without selling this condo. So, we’d have 2 mortgages if at any point we didn’t have renters.

I’m not sure which option is best. I think I’d like to short sell but I don’t know the necessary tax or legal implications – maybe that is worse than just staying put. Problem is, I think we’d have to stay in this condo for another 3-5 years and I really just don’t see that as a comfortable situation. So, what do you think? Option 1, 2, or 3… or another option you can think of???

So what is your opinion? What should this reader do?

Help This Reader: Short Sell, Rent Out, or Refinance? is a post from: PT Money: Personal Finance by PT.

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Wouldn’t it be nice to just write down the dollar amount of your income, give it to a home mortgage lender, and they freely lend you the money you need to buy a house? No pulling out tax returns, pay check stubs, or bank statements. Just your word.

For a potential home owner who is newly self-employed or who works for tips (that might go unreported for taxes), this sort of thing is very attractive, even if you have to take a hit on the mortgage rate.

Not too long ago this is sort of how it worked. Before the mortgage meltdown, you could get a home loan with a slightly higher mortgage rate without verification of your income. These were called stated income mortgages. Now often referred to as “liar loans”, because some people would lie about their incomes and end up defaulting on their homes. It’s not a stretch to say that these types of loans, and the subsequent investments made on these loans are what caused the crisis.

I’d Like a Stated Income Mortgage, Please

I recently contacted a few mortgage brokers to inquire about getting a home loan. I shared with them that I’m newly self-employed. Since I don’t have a pay check to show potential lenders, they ask for tax records and financial statements before they loan money to me.

While I plan on being able to report a solid income from my self-employed activities at the end of this year, my previous years aren’t as impressive. Therefore, I doubt they will lend to me right now. I’ve been asking around about a possible “stated income mortgage”, and the word is that no one is doing these loans anymore. Period.

Alternatives to the State Income Mortgage

It appears that the financial reform bill being discussed in Congress will effectively put the kibosh on stated income mortgages. So, what’s a newly self-employed person to do? Here are your alternatives:

• Pay Cash – If you have the cash, or are at least close, consider paying for your home in cash. Easier said than done, right? Don’t say it can’t be done though. An Ohio teen just bought her first home outright with her 4-H earnings.
• Wait Till You Show Solid Income – Most lenders will loan to the self-employed who can show solid evidence of a successful business. The rule I keep hearing is 2 years of income. However, some mortgage brokers I talked with said that 1 year might be enough. Budget $500-$1,000 to have a CPA prepare your financial statements and tax return this next January. You could be in your home by February 2011.
• Get a Paycheck – A quicker way to get a mortgage would be to get a salaried job, at least in the temporary. Being able to show a steady income, especially if you can show history in that industry, will quickly get you a mortgage, all things being equal.

Visit my new mortgage rate table page to see the most up to date listings of home purchase and refinance mortgage rates.

Stated Income Mortgage: No More Liar Loans Available is a post from: PT Money: Personal Finance by PT.

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Wells Fargo, the 4th largest bank in the United States based on deposit size, has always been one of the best banks to entrust your mortgage with.  Wells Fargo’s headquarters reside in San Francisco, California and at the end of 2009, Wells Fargo employs 276,000 in over 6,650 brick and mortar branches.  Don’t expect to find Wells Fargo internationally; they only have a couple of offices set up in India.

In October of 2008, Wells Fargo purchased Wachovia Bank and all assets for about $14.8 billion.  Initially, Citibank had made a deal with Wachovia but while that deal was still in the beginning stages, Wells Fargo swooped in and took control.  After a short battle with Citibank, Wells Fargo was voted by current Wachovia shareholders as the clear cut winner.

Later 2008, Wells Fargo was part of the Emergency Economic Stabilization Act Federal bail-out and received a $25 billion boost from the US Government.  It was later determined that Wells Fargo would need another ~$14 billion to remain stable and through an additional stock offering, Wells Fargo was able to raise most of the needed funds.

Today, Wells Fargo remains as one of the most trusted and highly regarded banks in the United States.  If you’re looking for a solid mortgage interest rate, look no further than Wells Fargo.  The $75 billion housing stimulus plan has allowed nearly every homeowner to refinance their current Wells Fargo mortgage to lower payments and prevent possible foreclosures and with current mortgage rates continuing to fall, now is the time to refinance if you have to.

The current Wells Fargo mortgage rate table you see above, current as of 6/7/2010, is in-line if not better than most US banks today.  If you are considering a new home purchase or a refinance, make sure you take a close look at Wells Fargo as well as other banks current mortgage rates.

Wells Fargo Mortgage Rates is a post from: PT Money: Personal Finance by PT.

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2. The Mortgage Process: How We Found the Right Lender for Our New Home Purchase
3. How to Calculate Your Mortgage Payment for a Refinance or Purchase

With Memorial Day coming up, I thought I’d share a little something for those that have served or are serving in our military.

If you are a Veteran or active duty military member and are looking to purchase a home, you may be eligible for a VA Loan. Check with your loan officer to see if you qualify in order to take advantage of the benefits you earned.

What is the VA-Guaranteed Home Loan?

The Veterans Affairs created the VA Loan Guaranty Program to aide those who served with their home purchase. Along with special advantages not available through any other loan, the VA has guaranteed the loan to the lender — this means the VA will repay about a quarter of a borrower’s loan if he or she or a later owner were to default. About 8 in 10 service-persons are unable to qualify for a conventional loan because of the stricter conditions. With the VA backing the loan, borrowers with poor credit are not automatically disqualified as they typically would be with a conventional loan.

Am I Eligible for a VA Home Loan?

There are exceptions and special circumstances for which someone may be eligible, so please check with your VA Loan Specialist. Below are some VA Loan eligibility requirements:

• Have served as an active duty member for 181 consecutive days or for 90 days during war time
• Have been in the National Guard or Reserves for at least six years
• Are an un-remarried spouse of a Veteran who died during service or from a service-connected disability
• Are a spouse of a military member missing in action or a prisoner of war

If you would like to learn more, go to the VA’s Web site Eligibility Frequently Asked Questions page. Do note that children of Veterans and active duty members are not eligible for the loan unless they themselves serve.

Why choose a VA Loan over others?

This program is just one small way to thank the military men and women. Not only does the VA Loan help people get into a home when a conventional loan may not, but it also offers many more advantages available exclusively to the Military:

• No down payment
• No private mortgage insurance
• Right to prepay—penalty free
• Mortgage interest rates are negotiable
• Limitations on closing costs
• Loan backed by the VA

When you choose to begin your home purchase, be sure to pick a loan officer who specializes in VA Loans. Many banks and mortgage brokers rarely work with these loans, meaning they are unfamiliar with the process, so your experience could take much longer than it needs to be. Review a list of the latest VA mortgage rates, which are currently at all time lows.

Photo by Randy Son Of Robert

Military Members, Are You Taking Advantage of Your Benefits? is a post from: PT Money: Personal Finance by PT.

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Can you calculate your mortgage payment? Sure, there are new purchase and refinance mortgage payment calculators out there on the web. But if you’re somewhat of a numbers geek / control freak like me, you’re going to want know how to do it yourself.

How to Calculate Your Mortgage Payment on a Purchase

It’s a great time to be calculating a mortgage payment. It’s almost summer and I know a lot of you are considering a move, or making your first purchase. Heck, it’s a great time to be doing so. Housing prices are down and mortgage rates are at all time lows. Understanding your monthly mortgage payment is a big part of knowing whether you can afford a new home. Here’s how to make the calculation for a fixed rate loan:

A = Your Monthly Payment
P = Initial Principal or Loan Amount
r = Interest Rate Per Period
n = Total Number of Payments

As an example, let’s assume you’re purchasing a new home for $200,000 on a 30 year loan at 5%. Here’s how the formula would break down:

A = $200,000 [ 0.00417(1 + 0.00417)³⁶⁰ / ((1 + 0.00417)³⁶⁰ - 1) ]

note: r = 0.05/12 months and n = 30 years * 12 months

A = $200,000 [ 0.00417(1.00417)³⁶⁰ / ((1.00417)³⁶⁰ - 1) ]
A = $200,000 [ 0.00417 * 4.473 / (4.473 - 1) ]
A = $200,000 [ 0.00417 * 4.473 / 3.473 ]
A = $200,000 [ 0.00417 * 1.2879 ]
A = $200,000 [ 0.00537 ]
A = $1,074

In this example, you’re new monthly payment would be $1,074. I tested it in an online calculator and it’s accurate.

Source: Vertex 42 Amortization Calculation

How to Calculate Your Mortgage Payment on a Refinance

Refinancing is huge right now. Many people don’t need or want to move, but would like to pay less monthly for their home. Or they may be considering a move from a 30 year mortgage to a 15 year version. Awesome! Depending on your current rate, you could end up paying about the same monthly, considering new low mortgage interest rates. But before you call up a mortgage broker or bank to start the process, it’s a great idea to take a second and calculate your new mortgage payment using the estimated new rates and terms.

To calculate your monthly payment on a refinance, simply use the same formula above, but change the loan amount and term to reflect the changes you’re making in the refinance. For instance, if your house was originally purchased for $200,000, but you’ve paid off $25,000, you’ll need to make your loan amount $175,000 for the calculation.

Add in the Monthly Payment Extras

Your payment, as calculated above, only takes into account the principal and interest portion of the payment. Be sure to factor in other costs: insurance, property taxes, private mortgage insurance, and association dues. These don’t have to be included in the payment usually. But some lenders may force you to based on your down payment. Since you are using this calculator to essentially estimate affordability, you are going to want add these costs to the total monthly payment calculated above.

Owning a home is definitely worth the monthly cost in my opinion. Hopefully with this calculation, you’re armed with the knowledge to know your monthly payment yourself. Good luck in your purchase or refinance.

For an extensive list of the purchase and refinance interest rates in your area, check out my brand new mortgage rates page.

How to Calculate Your Mortgage Payment for a Refinance or Purchase is a post from: PT Money: Personal Finance by PT.

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1. Should You Refinance Your Mortgage?
2. The Mortgage Process: How We Found the Right Lender for Our New Home Purchase
3. QuickHits: Mortgage Refinance and Credit Edition

Spring is in the air, and the first time home buyer tax credit is coming to an end. With the available credit, low interest rates, and prices still at low levels, there’s likely never been a better time to be buying your first home (I’m so jealous). But just because you have all that to your advantage, it doesn’t mean you should just throw out common sense when it comes to keeping other costs down. Here’s a few ways you can spend less on your first home. Most come down to taking the long term view versus worrying about your monthly payment.

Pay some costs annually. It may be the easier, more convenient way to do things, but I prefer to keep some costs out of the monthly mortgage payment. Lenders have it in their best interests to require you to pay them all your costs (property taxes, insurance, association dues) on a monthly basis. But you may have the option to pay these costs on your own annually. That means you get to keep your money the entire year and have your money working for you. Also, you may be able to avoid installment fees by paying annually on some of these charges.

Strive for a big down payment. The more you put down on the price of the home, the less in interest charges you’ll pay over the life of the loan. If total cost of ownership is what you want to keep low, then put a lot down. And by putting at least 20% down, you’ll avoid that pesky private mortgage insurance (PMI).

Shorten the length of your loan. Another way to reduce your interest costs is to go for a loan with a smaller term than the typical 30 years. An alternative to this would be to set up a prepaid plan where you make an extra principle payment every year, or pay more per installment. I’ve found this to be difficult to stick to in my own life though. If you want to guarantee fewer interest charges, then go with a 15 year loan versus a 30 year.

Consider furnishing the home as you go. It’s hard to have a home and not have furniture for it. However, it doesn’t mean you have to go out and rack up a bunch of high interest debt to fill every room of your house with furniture. Take your time completing the rooms and use cheap or old furniture until you’ve saved enough for the stuff you want.

Shop for really low mortgage interest rates. One last thing you could do to reduce the overall cost of your home is to make sure you get the lowest rate possible. Just a few percentage points can shave off thousands of dollars in interest over the life of the loan. For an extensive list of the purchase(and refinance) interest rates in your area, check out my brand new mortgage rates page.

First Timer? Reduce the Cost of Your First Home is a post from: PT Money: Personal Finance by PT.

Related posts:

1. Should You Refinance Your Mortgage?
2. How to Calculate Your Mortgage Payment for a Refinance or Purchase
3. Taking a Closer Look at Making Home Affordable Program