Frequently Asked Questions

Your total monthly payment is made up of up to five parts lenders call PITI plus any HOA fee: Principal & Interest (the loan itself), Property Tax (paid to your local government), Home Insurance (hazard insurance), and PMI (Private Mortgage Insurance, required only if your down payment is under 20%). Most online calculators show only principal and interest — ours shows the complete, realistic payment.

PITI stands for Principal, Interest, Taxes, and Insurance. It is the standard way lenders describe your full monthly housing cost. Principal pays down your loan balance, Interest is what you pay the lender for borrowing, Taxes are property taxes held in escrow, and Insurance is your homeowners premium (plus mortgage insurance if applicable). Lenders qualify you on PITI, not just the loan payment.

PMI (Private Mortgage Insurance) is required by most lenders when your down payment is less than 20%. It protects the lender, not you, if you default. PMI rates typically run from 0.25% to 1.00% of the loan amount per year, depending on your down payment size and credit score.

For most conventional loans you can request PMI cancellation once you reach 20% equity, and lenders must automatically terminate it at 22% equity under the Homeowners Protection Act. FHA loans are different: mortgage insurance generally stays for the life of the loan if you put down less than 10%. Our PMI Estimator shows your monthly and annual cost.

Even a small extra payment makes a big difference over a 30-year loan. Paying an extra $100/month on a $320,000 loan at 6.5% saves about $47,000 in interest and pays off the loan 4 years earlier. Use our Extra Payment tab to calculate your exact savings for any loan amount and rate.

A 30-year loan has lower monthly payments but much higher total interest. A 15-year loan has higher payments but can save you hundreds of thousands in interest. On a $320,000 loan at 6.5%, total interest is about $408,000 over 30 years versus about $182,000 over 15 years — a $226,000 difference. Choose 15-year if you can comfortably afford the higher payment and want to build equity faster.

Lenders typically use the 28/36 rule: your housing costs should not exceed 28% of your gross monthly income, and your total monthly debt payments (including the mortgage, credit cards, student loans, and car payments) should not exceed 36%. Use our Affordability calculator to convert your income and debts into a maximum home price.

For a conventional mortgage, most lenders want a score of at least 620, and you get the best rates at 740 or above. FHA loans can go as low as 500 with a 10% down payment, or 580 with 3.5% down. Your credit score strongly affects your interest rate and therefore your monthly payment.

No — property tax rates vary dramatically by state and even by county. Hawaii has one of the lowest effective rates (around 0.28%), while New Jersey is among the highest (around 2.49%). Our calculator lets you pick your state to auto-fill a typical rate, or enter a custom rate if you know your local figure.

Closing costs are the fees you pay to finalize a mortgage, including appraisal, title insurance, lender fees, escrow, and prepaid interest. They typically range from 2% to 5% of the loan amount, so on a $300,000 loan you might pay $6,000 to $15,000 on top of your down payment. Our Closing Costs calculator itemizes each fee and estimates your total cash needed at closing.

A fixed-rate mortgage keeps the same interest rate for the entire loan, so your payment is predictable. An ARM starts with a lower fixed rate for a set period (for example 5 or 7 years) and then adjusts periodically with the market. ARMs can save money early on but carry the risk of higher payments later.

Refinancing replaces your current loan with a new one, usually to get a lower rate, change the term, or tap equity. It makes sense when your new rate is low enough that the monthly savings exceed your closing costs within a reasonable time. A common rule of thumb is the break-even point: divide your refinance closing costs by your monthly savings to see how many months it takes to recoup them. Our Refinance calculator does this automatically.

An escrow account is set up by your lender to hold money for recurring expenses like property taxes and homeowners insurance. Each month a portion of your payment goes into the account, and the lender pays those bills on your behalf when they come due. This is why your monthly payment includes taxes and insurance, not just principal and interest.

Discount points let you pay upfront to lower your interest rate. One point costs 1% of the loan amount and typically reduces your rate by about 0.25%. Buying points makes sense if you plan to stay in the home long enough for the lower monthly payments to outweigh the upfront cost. Our Closing Costs calculator includes a discount-points input so you can see the trade-off.

Pre-qualification is a quick, informal estimate of what you might borrow based on self-reported finances. Pre-approval is more rigorous: the lender verifies your income, credit, and assets and gives you a commitment letter for a specific loan amount. Sellers take pre-approval far more seriously, so get pre-approved before house hunting.

Our calculations use standard US mortgage formulas and are accurate for estimation and comparison purposes. However, your actual payment depends on your credit score, loan type (conventional, FHA, VA, USDA), lender fees, and local tax and insurance rates. Always get a formal Loan Estimate from a lender before making an offer. Treat our tools as planning aids, not final quotes.