Your dream house may not be everyone else's idea of "Home, Sweet Home," but it's going to be all yours. Now if you can just figure out how to finance that bit of real estate. Not wanting to leave any stone unturned, you're on this site to get some background for your decision.
One kind of mortgage calculator ("how much house can I afford" type) takes a look at your budget and, with your input, works out how much you can afford to pay, either monthly or annually. Some are not comprehensive enough to take into account taxes, insurance and the increased costs of homeownership. It's worth your extra time to pull up several of these mortgage calculators and run your numbers through them for comparison. Then you're ready for the next step.
The fixed rate mortgage gives you the same monthly payment for the life of your mortgage. That's what you just worked through. This means you can set up your household budget more precisely and have greater control over how your money is spent. A "how much can I borrow" mortgage calculator helps you work out how much you can afford to pay for the house altogether.
Can you afford that dream home?
Maybe yes; maybe no.
It also depends upon the interest rates you negotiate with the lender, an increase in the size of your downpayment, the number of years you want the note for and the actual price you negotiate for the house. Using the mortgage calculator, you can input these factors individually and see what happens to your bottom line.
A small additional prepayment to your regular mortgage payment may be what pushes you over the top. A prepayment mortgage calculator can show you what it means over the life of your note. The beauty of the prepayment is that it is optional, not contractual. Unlike an Adjustable Rate Mortgage (ARM), you are not locked in to an increase every one to five years. You're only responsible to make the original mortgage payment.
If you are not so financially constrained with a monthly budget, and prefer to have a lower rate of interest to start, then use an ARM mortgage calculator. This will give you a rough idea of monthly payment over a period of time. ARMs do have the distinct disadvantage of putting your home in danger financially should the interest rates rise dramatically. You need to use the mortgage calculator to find out what your optimum interest rate would be before you reached that financial crisis. Make sure that the price of the house you buy gives you quite a large safety net so that the interest rate can rise without danger.
The beauty of mortgage calculators is that you get experiment before committing anything to paper or even speaking realtors or lenders. You find the information you need to complete the mortgage calculator's questions by using your own financial information, an approximate house price and the rates advertised on any piece of junk mail that's arrived in your mailbox. You work in the privacy of your own home without the fear of being hounded by a salesman doing follow-ups!
Take the preferred options you worked out on the mortgage calculator with you when you begin discussions with the broker. It's proof of your intentions and serves warning of your willingness to follow up on those you're negotiating with.