Buying a house is one of the biggest purchases you will ever make — not only because of the emotional investment in finding the right place to call home but also because of the complexity that comes with getting a mortgage.
Many of our clients looking to buy a home come into the process not fully understanding what exactly is involved with getting a Pennsylvania mortgage — from calculating their monthly mortgage payment to understanding what private mortgage insurance is and who needs it.
But that is why our team of mortgage brokers is here to help. If you are starting the process of buying a home and want a local partner to help you navigate the Pennsylvania housing market, give our Chester County mortgage company a call. We are here to answer your questions and find you the perfect home loan program to fit your budget and unique financial situation.
How to find a monthly mortgage payment you can afford with the right home loan program
One of the biggest benefits to working with a mortgage broker like Penn Street Mortgage is the ability to compare rates from several different lenders and financial institutions to understand what kind of mortgage program is best for your budget.
There are several common mortgage programs, including fixed-rate mortgages, adjustable-rate mortgages, and FHA and VA loans.
Fixed Rate Mortgages
Fixed-rate mortgages are a common conventional mortgage where the interest rate and monthly payments stay the same throughout the life of the loan, making budgeting simpler. This predictability and simplicity make fixed-rate mortgages a popular option for first-time homebuyers,
Adjustable-rate mortgages
Adjustable-rate mortgages start with a lower interest rate but may increase after the initial period. They are a good option if you plan on moving or refinancing soon. However, there is still a chance that your payments could increase in the future, which could make long-term budgeting challenging.
FHA Loans
The Federal Housing Administration loans stand out for their accessibility, requiring as little as a 3.5% down payment and offering more lenient credit requirements, which opens the door to homeownership for those with limited savings or past credit challenges. However, if you opt for an FHA loan, keep in mind that you will have to get mortgage insurance and face borrowing limits.
VA Loans
Lastly are VA loans. These loans are an option for veterans, active-duty service members, and spouses who are looking to purchase a home. They allow for home purchases with no down payment and no requirement for mortgage insurance.
Choosing the right mortgage is a decision deeply influenced by your personal circumstances, including the duration you plan to stay in your home, your financial health, and your future plans. Our team at Penn Street Mortgage is here to help you navigate those complexities so you understand exactly what you are getting into when you purchase your home.
Give us a call to compare rates and understand how your home loan can impact your housing costs.
How to Calculate Your Monthly Mortgage payments
Calculating your monthly mortgage payment is not just as simple as taking your home price and dividing it by the months in your loan term. Most buyers are surprised to learn about all the different costs and expenses that go into a Pennsylvania mortgage payment calculation.
With our Pennsylvania mortgage calculator, you can see how different factors like your down payment, property taxes and other monthly expenses will impact your monthly rate.
A typical mortgage payment is comprised of principal, interest, taxes, and insurance, often abbreviated as PITI. Here is a breakdown of how each part contributes to your monthly mortgage payment:
Principal and Interest
The principal is the sum of money that you borrow from a lender, and a portion of your monthly payment is allocated to pay down this balance. At the beginning of the loan term, a smaller proportion of your payment is applied towards the principal, but as the loan matures, a larger proportion of your payment goes towards reducing the principal balance.
Aside from the home price, your loan’s interest rate is the second biggest factor in how much you will pay every month on your mortgage. Interest represents the cost of borrowing the principal amount, and can fluctuate based on a borrower’s credit reports, the current national mortgage rates and other factors.
Property Taxes
Property taxes are another cost that most buyers choose to include in a monthly mortgage payment. Your mortgage lender will collect a monthly amount for your property tax, which is held in an escrow account, and then pays the annual property taxes on your behalf. This helps spread the cost over the year, making it more manageable for you.
Private Mortgage Insurance & Homeowners Insurance
Your monthly payment also includes premiums for basic homeowners insurance, which protects against damage to your property. Like taxes, these insurance premiums are often collected monthly by the lender and held in escrow until the annual premium is due.
If you make a down payment that is less than 20% of the home’s purchase price, most lenders will also require mortgage insurance which adds another expense to your monthly payment. That is why it is recommended for most conventional loans to save up a larger down payment so you can avoid this added expense.
Using a Pennsylvania Mortgage Calculator
As you start the home-buying process, it is understandable that you would want to see how much your total monthly payment will be depending on the home you want to purchase.
You can head to our mortgage calculator to customize how your monthly payments might change based on these factors, so you can get a better idea of what you can afford.
With our PA mortgage calculator, you can enter how much you will need to borrow for your home loan, how long you will take to pay it back, and the interest rate. You can also estimate how much you will need to pay for things like taxes and insurance, based on the local averages and your down payment.
Penn Street Mortgage Brokers | Your local Philadelphia Mortgage Broker
Do not go through the home buying process with questions. We are here to help you navigate the mysteries of your mortgage with our team of experienced, friendly and customer-focused mortgage brokers.
Contact us today to get pre-approved and understand what your options are when it comes to a Pennsylvania mortgage!
