How do I calculate my mortgage payment?
If you want to find out what your mortgage payment will be, try a mortgage calculator like this one. But, if you really, really want to do the math by hand, the formula for a basic mortgage payment is below.
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Although this is a great way to estimate the principal and interest portion of your payment, most people's payments will look a little different. Mortgage payments typically include principal, interest, real estate taxes, and homeowners insurance, commonly called PITI. They may also include payments for or contributions toward expenses like:
To calculate your new mortgage with these additional expenses included, just click "show additional inputs" on the mortgage calculator above and add your estimated figures. It will get you a very close estimate of what to expect.
Things to know before buying a house in South Dakota
South Dakota has very affordable real estate, but state real estate taxes are higher than most. Taxes on real estate in South Dakota rank 16th in the U.S., at 1.28% of the property's assessed fair market value. That means that if your home was assessed at $126,200, you'd pay $1,620 in taxes each year.
South Dakota isn't one of the states seeing huge changes due to climate change -- at least, not yet. The state is warming, but more slowly than most, and while larger and more intense downpours are possible, much of this excess water is expected to run off into river systems. So, if you live near a river, flooding may be more likely, but you don't need to worry about an increase in violent storms with high winds, at least not in the near term.
Unless you live on or close to a body of water, a homeowners insurance policy may provide you with plenty of coverage for your needs, but be sure to ask your insurance agent because they have their finger on the pulse of claims in your area. Once you know what your insurance will cost, you can plug that number into the South Dakota mortgage calculator to give you a better estimate of your overall payment.
Tips for first-time home buyers in South Dakota
First-time home buyers in South Dakota can take advantage of down payment assistance offered through South Dakota Housing's Fixed Rate Plus Loan. This program allows for 3% to 5% provided for your down payment in the form of a second mortgage with no payment due until you sell or refinance the initial mortgage.
You will have to income-qualify, though, based on your household size and county of residence. The upper income range for a family of two, for example, is $95,100 to $106,500 -- so it can be pretty easy to qualify for assistance. First-time home buyers will be limited to homes priced under $385,000, but that, too, is simple to find in South Dakota.
Advice for all first-time borrowers
There's a lot to do to get ready for your first mortgage, so first-time home buyers should ideally start working on making themselves the best possible borrower months or years before contacting lenders. While credit scores are important, they're not everything when it comes to getting a mortgage. You'll also need to demonstrate that:
- Your employment is reliable, by staying on the job for at least two years prior to and throughout the buying process.
- You're not overburdened with debt, by maintaining a low debt-to-income ratio.
- You're prepared for closing with money for closing costs and down payment, set aside in a separate account (or proof you've applied for assistance).
- You always pay your bills on time -- this is the biggest factor that goes into calculating your credit score.
It can also be incredibly tempting to try to get ahead of some of the expenses of moving to a new house by buying new furniture or decor, but this can backfire by raising your debt-to-income ratio, over-encumbering your credit cards or credit lines, and eating into your seasoned cash to close.
Guard your credit carefully through the home-buying process, and wait to do anything dramatic until you've closed. Underwriting will check your file at least twice, if not more, prior to closing, and can cancel your mortgage should something change.
