We are going
to start off small with an easy calculation. Don't worry. You will do fine.

The
Three Bears Worksheet

The three factors you need to figure what your monthly
payment would be are:

The total loan amount (the selling price minus
10% for the down payment)

The interest
rate you�ll pay on that total loan amount, and

The repayment term, or
length of time you have to repay the loan

Write three words down
in a column on your work sheet, just like this:

LOAN : RATE : TERM :

TIP: Term

The higher
the interest rate, the higher your monthly payments will be. Generally speaking,
though, the longer the repayment term, the lower your mortgage payments.

Pick a Repayment Term

How long are you going to take to repay?

Let�s
say that you expect to get a standard 30-year fixed-rate mortgage.
So, write "30" behind the word TERM on your worksheet.

Pick an Interest Rate

Another easy figure.

For our Example we�re going to assume
that the interest rate is 8%. So, write 8% on your worksheet behind the word RATE.

To find the current interest rate on a 30-year fixed rate mortgage,
look in the real estate section of your local newspaper or call a mortgage lender.

Pick
a Price

Try to be realistic!

Since you're already interested in
becoming a homeowner, you've probably been gazing wistfully at the real estate
ads in newspapers or visited a couple of open houses. You have an approximate
idea of selling prices of homes in your area. We'll use $90,000 as the selling
price for the Example.

Figure the Total Loan Amount

Wait, we'll
show you how...

To establish the total amount of your loan, first figure
what amount is 10% of the selling price you've just selected. We'll consider that
the amount you'll make as a down payment. In our case, the down
payment amount would be $9,000 which means that the rounded-off total loan
amount will be $80,000. Write that number on your worksheet behind the word LOAN.

Figure Your Ballpark Payment

This will give you a reference point.

So,
in our example, our total loan amount is $80,000, which we'll borrow over 30 years,
at a fixed rate of 8% per year.

Now multiply 80,000 by 8%. You get 6400,
which will be a total annual interest amount. Divide that by 12 months and your
monthly payment is just $533.

NOTE: When you look this up
on a standard mortgage chart you'll find that the total principal and 8% interest
payment will be $587. These are solid ballpark numbers you can use reliably to
estimate monthly housing payments.

To figure out how much your loan will
really cost you, use our calculator which determines how much house you can really afford.
In the box asking for your APR, substitute the interest rate if an APR is not
available. This will give you a good idea how much your loan will really cost
you in the long run.