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Even casual home shoppers have likely come across an online mortgage calculator, which is perhaps the most misunderstood financial tool on the internet.

Based on cursory financial information inputted by the user, a mortgage calculator reveals approximately how much house that person can afford. Or, more specifically, how much money the user could reasonably borrow from a lender in order to purchase a home, complete with an estimate of the monthly mortgage payment.

And while the process may seem straightforward, it is often at this first (and crucial) step that first-time homebuyers will make a mistake.

Livabl recently sat down with Zack Tolmie, a home lending officer with Citibank, and Jodi Carter, a Certified Public Accountant working in New York City, to discuss how homebuyers can best use the data from an online mortgage calculator.

1. Find an interpreter

Numbers don’t lie, but they don’t necessarily tell the whole story, either.

“An online mortgage calculator may tell you that you can technically afford to buy a house valued at $300,000, but in reality, based on your larger financial picture, including debts and long-term financial goals, you really shouldn’t be buying anything over $250,000,” says Tolmie.

The estimate typically does not include other potential monthly and yearly costs associated with homeownership, like cable, internet, pool cleaning and landscaping. According to the listing site Zillow, these “hidden” costs can easily add up to almost $10,000 annually for the average homeowner.

A mortgage calculator gives a broad overview, at best, of how much house you can afford based on your data, but it often doesn’t consider some important variables that can drastically reduce your estimate.

“They don’t take into consideration the portion of the monthly payment for escrow, which may include property taxes and various forms of required insurance,” says Carter.

The temptation for some buyers is to bite off more home than they can realistically chew.

“The most common and damaging mistake that prospective homebuyers make is choosing a monthly commitment that is the highest amount they believe that they can afford. They don’t leave room for ongoing savings and they find themselves working just to pay the mortgage,” adds Carter.

2. Leave no room for error

One of the caveats of a mortgage calculator is that it is performing calculations based on user-provided data, which could be inaccurate or outdated.

For example, a shopper may think that they have a “good” credit score — which ranges from about 670 to 740 — when in actuality, their score hovers in the low-600s and technically “needs work.” The difference in credit score can drastically alter how much a shopper will get approved to borrow, which directly impacts their monthly mortgage payment.

According to the mortgage calculator on NerdWallet, a buyer in Atlanta, GA with “poor” credit and an annual salary of $90,000 may only get approved for a loan of about $386,000, compared to $417,000 for a buyer with a good credit score.

Free online tools like Credit Karma allow shoppers to see the same financial information as lenders.

“A lot of shoppers are unaware of mistakes on their credit report, and mistakes can cost thousands of dollars and time. Often, buyers will find mistakes when they make an offer, and then it’s too late to do anything to fix it,” says Tolmie.

Tolmie recommends having a financial expert review your credit report a year ahead of when you plan to buy.

“An expert can give you very specific details on how to improve your credit score, like just making all of your payments on time for twelve consecutive months. On-time payments are the biggest impact on a credit score,” says Tolmie

3. Manage your debts

According to a recent study, approximately 80 percent of adult Americans (across all generations) carry some amount of debt — whether it be student loans (Millennials) or credit card debt (Gen X and Baby Boomers).

Understanding the role debt plays in homebuying and actually knowing how much debt you carry can save you from a lot of headaches and heartaches down the line.

“The fact that you have debt doesn’t hurt your ability to get a mortgage, but what lenders are really focused on is how much your monthly payment on that debt is. We want to make certain you can afford that monthly payment as well as your monthly housing debts with your current income,” says Tolmie.

Mortgage calculator estimates rely on the accuracy of the user’s data. In reality, a shopper may have a monthly debt payment over $1,000 and mistakenly downgrade that payment. Or worse yet, fail to include an estimate for future payments because they don’t know how much they will amount to.

“With student loans especially, a bank will estimate conservatively, which could curtail your borrowing power,” says Tolmie.

4. Prepare a trial run

If the estimated payment feels too high to comfortably afford, it probably is. To find out how much of a monthly payment you can truly afford, start an aggressive savings plan.

“When preparing to buy a home, take the desired down payment amount and divide it by the expected monthly cost of your new home. That calculation will give you the number of months that you will need to save for the down payment,” says Carter.

Carter advises her clients to faithfully set aside money into a savings account for that duration.

In the end, this not only proves that you have the cash for the down payment, but that you can afford the monthly payments without struggle.

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