Before you start house hunting, you need to know how much you can afford and what a practical fit for your budget might be. I’m here to help you understand all the additional costs associated with owning a home.
A mortgage calculator, which can be found online, will help you figure out how much you can afford by showing your monthly payment based on the price of the home and the size of your down payment. However, your monthly principal and interest payments aren’t the only costs you’ll incur related to your mortgage.
First, you’ll have closing costs, which can vary depending on your lender and the specifics of your loan. In New Mexico, closing costs for homebuyers typically range from 2 to 5 percent of the home’s sale price. Real estate commission rates in New Mexico are negotiable, but the average is around 6 percent of the sale price for residential properties and 10 percent for land sales. The total commission is usually split between the seller’s and buyer’s representation.
On an ongoing basis, you’ll need to budget for homeowner insurance and property taxes. If you take out a conventional loan with a low down payment, you’ll also need to pay for private mortgage insurance (PMI), which will be added to your monthly payment. Additionally, if you live in a neighborhood with a homeowners association (HOA), you’ll need to pay HOA dues.
The amount of your down payment can vary widely. It can be as low as 3 percent or even nothing, depending on the loan type. Most mortgage calculators assume a 20 percent down payment, which is the amount you’ll need to avoid PMI if you’re getting a conventional loan.
The length of your loan term also affects your monthly payment. A typical mortgage calculator assumes a 30-year term, but terms can be as short as 10 or 15 years.
Interest rates fluctuate with the economy—rising when the economy is thriving, and falling when it’s struggling. Most economists expect interest rates to decrease throughout 2025. Currently, according to Zillow, the 30-year fixed mortgage rate is 6.21 percent, the 15-year fixed rate is 5.53 percent, and the 5/1 ARM rate has decreased slightly to 6.76 percent.
With an online mortgage calculator, you can enter the price of the home and the amount of your down payment to see if the monthly payment fits your budget. If the payment is too high, you may need to look for a less expensive home, which is a common issue for homebuyers in today’s elevated real estate market.
The calculator also shows how a higher or lower down payment will affect your monthly payments. This can help you decide whether
you’re ready to buy a house now or if you should wait longer to save more money.
You can input different loan terms into the calculator to figure out which one best fits your budget. With a 30-year term, your monthly payments will be lower, but you’ll pay more in interest over time. A 15-year mortgage will have higher monthly payments but will cost less overall. Experiment with different terms to see which one aligns with your financial goals.
The calculator can also help you see how different interest rates affect your payments. This is useful if you’re considering refinancing or trying to improve your credit score to get a better rate. A slightly lower interest rate can make a significant difference, so use the calculator to decide if it’s worth pursuing. As always, I’m here to help you find your way home.
