This post first appeared in the July edition of Cirios Trends: Getting to the Bottom of the Housing Market

One of the first steps in any home buying search is figuring out how much you can afford. This means determining what your monthly income can support in terms of mortgage expenses, taxes, insurance and upkeep, in addition to what you need to have saved for a down payment.

One easy way to figure this out is to go online and find a website that provides a mortgage calculator like this one at Bankrate.com. The vast majority of mortgage calculators are very easy to use and provide instant results which are pretty reliable when it comes to how much your monthly mortgage payment will be.

For people who are just starting to explore home ownership, a mortgage calculator can be a simple resource which doesn’t require you to speak with anyone or force you to gather all your financial information to get pre-approved for a loan. The reality is that your mortgage payment will be the largest portion of your monthly housing expense, and a mortgage calculator is a pain free way to figure how much you can afford to borrow and how much you need to save to buy your dream home.

When using a mortgage calculator, however, you need to understand that the calculator only provides you with an estimate of your monthly mortgage payment, not the entire monthly cost of owning a home. New owners are often surprised at how much money is required to own a house beyond this relatively straightforward expense. Taxes, homeowner’s insurance, HOA fees (for condos and developments), and upkeep can be materially expensive and need to be accounted for when evaluating your home purchase decision.

The vast majority of mortgage calculators fail to provide these key figures, so its important to talk with a real estate professional to get a better understanding of how much you should expect to pay each month, in addition to your mortgage payment. Cirios has more detailed calculators which include all salient home ownership costs, enabling our clients to make well informed home buying decisions.

The mortgage calculator is a great tool to get started in the exploratory phase of the home buying process, but its important to be aware of its limitations.