House shoppers hurrying to find dream homes before interest rates go higher often turn to online calculators offered by personal finance and real estate sites to get a feel for just how dreamy a home they can afford. When they do, they risk getting bad information, experts say. “Most online calculators fall short of giving all the information you need to estimate a house payment,” said Bob Harkson, a certified financial planner with Phase 2 Wealth Advisors in Gig Harbor, Washington. Philip A. Seagraves, an economics and finance professor at Middle Tennessee State University Jones College of Business puts it more pungently. “My opinion of the online calculators is that they’re really just click-bait to get people to a site,” Seagraves said. Property taxes are often the biggest omission.
Many online calculators have only three input fields — loan amount, interest rate and number of years. The resulting payment includes only principal and interest. Yet monthly payments usually include a sizable contribution to an escrow fund for annual property taxes. Property taxes vary significantly depending on local tax rates, but can amount to thousands of dollars a year, adding hundreds a month to the housing payment. Insurance is another important item often skipped. The costs of a homeowners’ insurance policy is usually also collected monthly into an escrow fund from which the annual premium is paid once a year.
Online calculators are hardly the last word when it comes to figuring out your payments. Lenders are legally required to give borrowers a loan estimate form that includes estimated taxes and insurance as well as interest and principal payments. Borrowers must get the loan estimate within three days of submitting an application.
Source: CNBC — Don’t forget to check with me first to get a more accurate reading when trying to estimate your payments
