Mortgage Calculator

A common guideline is the 28/36 rule: spend no more than 28% of your gross monthly income on housing costs (mortgage, taxes, insurance) and no more than 36% on total debt payments. For example, if you earn $80,000/year ($6,667/month), your mortgage payment should ideally stay below $1,867/month. However, your actual affordability depends on your down payment, interest rate, credit score, other debts, and local property taxes.

A 15-year mortgage has higher monthly payments but a lower interest rate, and you'll pay significantly less total interest. A 30-year mortgage has lower monthly payments, making it more affordable month-to-month, but you'll pay more total interest over the life of the loan. For example, on a $300,000 loan at 6.5%, a 30-year mortgage costs about $1,896/month with $382,633 in total interest, while a 15-year mortgage costs about $2,613/month but only $170,389 in total interest — saving you over $212,000.

The traditional recommendation is 20% down to avoid Private Mortgage Insurance (PMI), but many loan programs allow much less. FHA loans require as little as 3.5% down, conventional loans can go as low as 3%, and VA/USDA loans may require 0% down. However, a larger down payment reduces your loan amount, monthly payment, and total interest paid. On a $300,000 home, 20% down ($60,000) versus 5% down ($15,000) saves you about $300/month in payments.

Private Mortgage Insurance (PMI) is required on conventional loans when your down payment is less than 20%. PMI typically costs between 0.5% and 1% of the loan amount per year. On a $280,000 loan, PMI could add $117-$233/month to your payment. PMI is automatically removed once your loan balance reaches 78% of the home's original value, or you can request removal at 80%. FHA loans have their own version called MIP (Mortgage Insurance Premium).

Your credit score significantly impacts your mortgage interest rate. Borrowers with excellent credit (760+) typically get rates 0.5-1.5% lower than those with fair credit (620-679). On a $300,000 30-year mortgage, a 1% higher interest rate increases your monthly payment by about $180 and costs over $65,000 more in total interest. To get the best rate, aim for a credit score of 740+ and shop rates from at least 3-5 lenders.

Mortgage points (discount points) let you pay upfront to reduce your interest rate, with each point costing 1% of the loan amount and typically reducing the rate by 0.25%. Whether points make sense depends on your break-even point. For example, paying $3,000 for one point on a $300,000 loan might save you $45/month. You'd break even in about 67 months (5.5 years). If you plan to stay in the home longer than that, buying points can save money long-term.

Closing costs typically range from 2-5% of the home's purchase price. On a $300,000 home, expect $6,000-$15,000 in closing costs. These include lender fees (origination, underwriting), title insurance, appraisal fees, attorney fees, prepaid items (property taxes, homeowner's insurance), and recording fees. Some sellers may agree to pay a portion of closing costs, and some lenders offer 'no-closing-cost' mortgages in exchange for a higher interest rate.

Refinancing is generally worth it if you can lower your rate by at least 0.75-1%, plan to stay in the home long enough to recoup closing costs (typically 2-5 years), or need to switch from an adjustable-rate to a fixed-rate mortgage. For example, refinancing a $250,000 balance from 7.5% to 6.5% on a 30-year mortgage would save about $170/month. With $5,000 in closing costs, you'd break even in about 30 months.

Beyond your monthly mortgage payment, budget for: property taxes (typically 0.5-2.5% of home value annually), homeowner's insurance ($1,000-$3,000/year), maintenance and repairs (1-3% of home value annually), HOA fees if applicable ($200-$500/month), utilities ($200-$400/month), and PMI if your down payment is less than 20%. A good rule of thumb is that true homeownership costs are 30-50% more than just the mortgage payment.