The Mortgage Genie

Annual gross income

This is your "annual gross income" before taxes used in mortgage calculations.  If you are married, it should be your total combined income.  A general rule of thumb states: If you have the capacity to repay the mortgage loan, you can afford a home 2.5 times the amount of your "annual gross income."

Required (Do Not Enter in Commas)
Min: 13000 (thirteen thousand)
Max: 21000000 (twenty-one million)
Decimals: 0
Example: If your annual gross income is $65,000, enter: 65000
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Percent of income

Set all inputs first, then change this one for various budgets.
This represents how much of your monthly income you are willing to spend on a home. Standard underwriting guidelines typically used by mortgage lenders allow you to spend 28% of your "monthly gross income" (before taxes) for housing.  This does not mean you have to spend this much.

Think of % of Income as the "master" INPUT.  Set all other INPUTS (some default settings will be good enough), then come back and change this one INPUT up or down to change everything.  As you raise/lower this "key" variable, check the ratio values and the dynamic text by Strategy: (In the Housing/Income ratio & Housing+Debt/Income ratio section) so you don't exceed the set limits.

If the limits are exceeded, you will also see the amount to lower % of Income by directly below where you input it.

Required (Do Not Enter in Commas)
Min: 1.0
Max: 55.0
Decimals: 1
Example: If you want to spend less than 28.0% of your income, say 21.5%, enter: 21.5
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Mortgage loan down payment

How much do you want to put down on the mortgage loan?

Important tip
Most lenders do not require private mortgage insurance (PMI) when you make a down payment of 20% or more.  In lender's terms, this means a loan/value (LTV) ratio of 80% or less.  For example, if your down payment is 10%, the LTV ratio is 90% (you are borrowing 90% of the Purchase Price).  You pay PMI when the LTV ratio is in excess of 80%.  Confused?

The Bottom Line
The PMI percent is calculated for you automatically.  "Dynamic" text displayed to the right of the private mortgage insurance input box displays the percent you should enter into the private mortgage insurance input box manually.  Yes, it is that easy.  Oh, please pay attention if the down payment is 20.0% or higher - PMI goes to zero (.00).  More on PMI in the private mortgage insurance section.

Required (Do Not Enter in Commas)
Min: 0
Max: 89
Decimals: 1
Example: If you want to put 20.0% down, enter: 20.0
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Interest rate and APR %

This input is the current "market rate,"  "stated rate, " or "nominal rate of interest - not the APR %."   This "market rate" does not reflect the true cost of borrowing like the APR % is supposed to.  Please use our APR % calculator for this calculation and read the comments below.

Remarks
The stated rate, or nominal rate, differs from the APR %.  The stated rate does not include any costs associated with the loan, the APR % does.  It is important to distinguish between the two.  A few facts about APR% should help.

APR %
Lenders quote APR %, or annual percentage rate, (within 3 days) to provide a more truthful insight of the interest rate you are paying.  The APR %, as calculated under the Truth-and-Lending Act, combines the interest rate (stated rate or nominal rate) with other costs of the loan into a single figure.  This number is supposed to reflect the true cost of borrowing and provide a standardized yardstick by which to compare financing from different sources.  Keep in mind that APR % may be calculated slightly different at each lender.

Required (Do Not Enter in Commas)
Min: 1.0000
Max: 25.0000
Decimals: 4
Example: If current interest rates are 7.3750 (7 3/8s), enter: 7.3750
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Term, or length of loan

The length of the mortgage loan in years.  Please note the Mortgage Genie™  mortgage calculator also applies to variable rate mortgages as well because variable rate loans are "fixed" to start with.

Required (Do Not Enter in Commas)
Min: 5
Max: 80
Decimals: 0
Example: If you want to see OUTPUTS for a  20 year loan enter: 20
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Title insurance

Title insurance protects both the lender and the buyer from flaws in the title detected after the property is purchased.  In most cases the amount insured is equal to the Purchase Price.  It is negotiable between the buyer and the seller who pays for title insurance.

A good "estimate" for title insurance $2.50 per $1,000 of the Purchase Price.  A more accurate number may be obtained from a source where you are planning to buy.

Important Tip
A combined lender/owner policy may save you money.  Additional savings may be possible if a "reissue rate" is available from the company who previously insured the title.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 10
Decimals: 2
Example: If Title Insurance is $2.75 per thousand, enter: 2.75
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Property taxes

Property taxes are paid annually to the local government where the property is located.  A good "estimate" is 1.5% of the Purchase Price, but a more accurate number may be obtained from a source where you are planning to buy.

Important tip
It is very common for an "adjustment" to be made regarding property taxes at closing.  For example, the seller may owe taxes for the "current period" and is obligated to pay, or the seller may have already paid and the buyer is obligated to reimburse this expense.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 20
Decimals: 1
Example: If property taxes are 2% enter: 2.0
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Home owners insurance (HOI)

Home owners insurance (HOI), or Hazard Insurance, protects both you and the lender from certain events.  The extent of the coverage is determined by the scope of the policy.  A typical home owners insurance package includes personal liability, property, and dwelling coverage.  An example of a less common component would be flood insurance.

A good "estimate" is .5% of the Purchase Price, but a more accurate number may be obtained from a source where you are planning to buy.

Important tip
Lenders typically require the first years premium down (paid at closing).  To be conservative, our Mortgage Genie™  mortgage calculator lists home owners insurance down and monthly.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 10
Decimals: 2
Example: If home owners insurance is .35% enter: .35
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Private mortgage insurance (PMI)

Private mortgage insurance (PMI) protects lenders from loss if the borrower defaults.

The first number on the mortgage calculator is a % of the loan that is paid up-front and is part of the "closing costs."  The second number on the mortgage calculator is a % of the loan that is paid yearly.  To help lower "closing costs," the current trend is a higher premium charged yearly.

The cost of PMI is correlated to how much the Down Payment is. The following table illustrates "good estimates" of PMI premiums for common down payments.

Important tips
The PMI percent is calculated for you automatically.  "Dynamic" text displayed to the right of the private mortgage insurance input box displays the percent you should enter into the input box manually.  Yes, it is that easy.  Oh, please pay attention if the down payment is 20.0% or higher - PMI goes to zero (.00).

The bottom line
If your down payment is 20% or more (have a loan/value ratio (LTV) of 80% or less), PMI is not required.  However, ask your lender to be sure.

The PMI controversy
If you put less than 20% down, say 10%, once you reach 20% equity you are no longer obligated to pay PMI  It is your responsibility to inform the insurance company when you reach the 20% equity though.

However, you can reach 20% equity in two ways.  By making enough payments (an additional payment can help build equity faster) and the house appreciating in value.  If you feel your home has appreciated enough in value to meet the 20% equity "cut-off" point, contact your lender and reorder an appraisal.  If the new appraised value, combined with the amount you have paid equals or exceeds 20%, they should assist you with the termination of the PMI premium.  You may further save money if you contact the same real estate appraiser that appraised the property when you purchased. If it is recent enough, a discount could be applied because the appraisal could take less time.  Hey, it never hurts to ask.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 5
Decimals: 2
Example: If PMI is .35% enter: .35
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Association or condominium fees

Fees, or dues, for an Association, Condominium, or Co-op may be accounted for here.  The fee is calculated as a % of the Purchase Price.  If your fees are quoted to you in dollars, change the % until you see the correct dollar amount displayed.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 10
Decimals: 1
Example: If association or condo. fees are 1% of the Purchase Price enter: 1.0
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Discount points

Points, or "discount points," are a confusing concept.  One point equals 1% of the loan amount and usually refers to a cost associated with the loan.  For example, if there were a $100,000 loan, one point would be equal to $1,000.

Points can be viewed in a different way as well.  They can be looked at as a way to "buy down" the interest rate of the loan, which amounts to paying interest up-front.  A general rule of thumb is one Point equals 1/8 of 1% in yield.  For example, to lower the interest rate of a $100,000 loan from 9% to 8%, it would cost "eight points " or $8,000.  Confused?

The bottom line
Discount points are a cost to you.  You do not want to pay points unless market conditions leave no alternative. Shop around and find the best deal possible.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 10
Decimals: 2
Example: If the going market rate is to charge 1.25 Points, enter: 1.25
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Origination fees

Origination fees fees charged by the lender to "originate" or write up the mortgage loan, and are very similar to points.

Like points, origination fees are figured as a % of the loan, but oddly enough, are figured in points.  Recall a point is 1% of the mortgage loan, so a $100,000 mortgage loan, that has origination fees equaling 1 point, would cost you $1,000.  Now you can see why these terms are used interchangeably.

The bottom line
Origination fees are a cost to you.  You do not want to pay origination fees or points unless market conditions leave no alternative.  Shop around and find the best deal possible.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 10
Decimals: 2
Example: If you discover origination fees of 1 point , enter: 1.00
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Other closing costs

Other closing costs are fees charged by lenders at closing.  These costs will vary from one mortgage lender to another.  Some closing costs are itemized under Total Savings Needed automatically, however; you may account for additional costs you pay for in this field.

Important tip
It is typical for the buyer to pay these costs, however; who pays for what is negotiable.  It may be possible to finance all or some of the closing costs as well.  Fannie Mae estimates total closing costs typically range from 3-6% of the Purchase Price.

Also, do not include escrow amounts for PMI, HOI, and property taxes here.  These costs are already accounted for.  Your lender will assist you with escrow information.

Escrow Account
This is a "reserve" account used to pay taxes and insurance and is managed by a third party.  Ask your lender for details regarding escrow information.

The following list illustrates some common other closing costs you may incur:

• assumption fee
• attorneys fee
• condominium fee
• co-op fee
• document preparation fee
• property survey fee
• recording fee
• well & septic certification
• transfer taxes
• pre-paid interest
• underwriting & processing fees
• credit report fee
• appraisal fee
• other

*Items in red are "generally accepted" inputs for the APR % calculator.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 5000
Decimals: 0
Example: If other closing costs are $400 enter: 400
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Utilities

Utilities should be calculated at approximately .1% of the Purchase Price.  For example, if the Purchase Price is $100,000, a good estimate for utilities would be $100 per month.

Important tip
Estimating utilities provides a more realistic budget than no estimate at all.  Different regions of the country may deviate from this estimate somewhat.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 25000 (twenty-five thousand)
Decimals: 0
Example: If you want to estimate utilities at $90 per month enter: 90
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House maintenance expense

Maintenance should be calculated by the mortgage calculator at approximately .05% of the Purchase Price.  For example, if the Purchase Price is $100,000, a good estimate for maintenance would be $50 per month.

Important tip
Estimating maintenance provides a more realistic budget than no estimate at all.  Different regions of the country may deviate from this estimate somewhat.  Simply use the mortgage calculator estimate as an approximation.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 25000 (twenty-five thousand)
Decimals: 0
Example: If you want to estimate maintenance at $50 per month enter: 50
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Additional mortgage payment

If you want to "prepay," or add to your monthly mortgage payment to save on interest charges and pay the mortgage loan off early, you can figure that into your projected budget. Make sure there is not a prepayment penalty in the mortgage loan agreement, and the bank knows to reduce your principal with the additional money.

Adding to the principal by "prepaying" accelerates equity building. If you are paying private mortgage insurance (PMI), this could help you reach the 20% equity "cut-off" point faster and terminate the PMI premium.

Important tip
To insure the additional payment is applied to principal, it is a good call to write two checks.  On the memo portion of the second check write, "apply to principal only."  This helps the person receiving the payment to differentiate between the two and acts as a receipt for your records.  To see how an additional payment affects the loan, see the 30y & 15y Fun Facts to Know section at the bottom of the mortgage calculator.

Not Required (Do Not Enter in Commas)
Min: 0
Max: 10000 (ten thousand)
Decimals: 0
Example: If you want to pay an additional $50 per month enter: 50
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Other monthly debt

These are other long-term debts, or payments, you make every month.  Examples include other house payments (principal & interest only), installment loan payments, a car, boat, snowmobile, or motorcycle payment, child support, alimony, credit card payments, and investments with negative cash flows.

Important tips
Typically, short-term debt (12 months or less) should not be used for this calculation.  For example, if you have 9 monthly payments left on your automobile loan, and your obligation will be fulfilled at that time, exclude this payment from the calculation.

Typically, lenders will use your minimum credit card payments and add them together.

The amount of the negative cash flow is "added" in when calculating other monthly debt.  For example, if a rental property has a monthly principal and interest (PI) payment of $800 and is rented for $600, you would "add" in $200 to other monthly debt.

Required (Do Not Enter in Commas, may be 0)
Min: 0
Max: 10000 (ten thousand)
Decimals: 0
Example: If you pay $618 per month in other monthly debt, enter: 618
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