Mortgage Calculator
Use our free mortgage calculator to estimate your monthly mortgage payment including principal, interest, property taxes, homeowners insurance, and PMI. Find out how much house you can afford, compare 15 vs 30 year mortgages, and view a detailed amortization schedule. Updated with current 2026 rates from Freddie Mac (6.21% for 30-year fixed).
How Much Will My Mortgage Payment Be?
Your monthly mortgage payment (PITI) includes Principal, Interest, Taxes, and Insurance. The exact amount depends on your loan amount, interest rate, loan term, and location.
- Mortgage Formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ - 1]
- Current Rates (Dec 2025): 30-year fixed = 6.21% | 15-year fixed = 5.47% (Freddie Mac)
- Quick Estimate: For every $100,000 borrowed at 6.25% for 30 years ≈ $616/month (P&I only)
- 28/36 Rule: Housing costs should not exceed 28% of gross monthly income
💡 Affordability Check
Based on the 28% rule, you would need approximately $108,000/year income to comfortably afford this payment.
💡 Tip
Remember to budget 2-5% of the home price for closing costs ($8,400-$21,000 for this price range).
🏦 30-Year Fixed
🏦 15-Year Fixed
30-Year Fixed
15-Year Fixed
💡 Pro Tip
Making just one extra payment per year (bi-weekly payments) can save over $30,000 in interest and pay off a 30-year mortgage 4-5 years early.
📖 How to Use This Mortgage Calculator
Follow these simple steps to calculate your monthly mortgage payment and determine how much house you can afford:
Enter the Home Price
Input the purchase price of the home you want to buy. The median U.S. home price is approximately $417,000 as of late 2025. If you're unsure, browse listings in your target area for realistic pricing.
Set Your Down Payment
Enter the amount you plan to put down. 20% avoids PMI (Private Mortgage Insurance), but many first-time buyers put down 3-10% using FHA or conventional loans. VA and USDA loans offer 0% down for eligible buyers.
Choose Your Loan Term
Select 15 or 30 years. A 30-year mortgage has lower monthly payments but costs more in total interest. A 15-year mortgage has higher payments but saves significantly on interest—often $200,000+ on a typical loan.
Enter the Interest Rate
Input your expected interest rate. Current 30-year fixed rates average 6.21% (Freddie Mac, December 2025). Your actual rate depends on your credit score, down payment, and loan type. Get pre-approved to know your exact rate.
Add Taxes, Insurance & PMI
Include property taxes (avg 1.1% of home value annually), homeowners insurance ($1,500-$2,500/year), and PMI if your down payment is under 20%. These are often overlooked but significantly impact your true monthly payment.
Review Your Total PITI Payment
Your results show the complete PITI breakdown (Principal, Interest, Taxes, Insurance). Use the other tabs to check affordability, compare loan terms, and see how extra payments can save you money.
💡 Pro Tip: Get Multiple Quotes
Freddie Mac research shows homebuyers who get quotes from multiple lenders can save $600 to $1,200 per year. Even a 0.25% rate difference on a $320,000 loan saves over $17,000 in interest over 30 years. Always compare at least 3-5 lenders.
❓ People Also Ask About Mortgages
What is the monthly payment on a $400,000 mortgage?
For a $400,000 home with 20% down ($80,000), you'd have a $320,000 loan. At 6.25% for 30 years, the principal and interest payment is approximately $1,970/month. Add property taxes (~$367/mo), homeowners insurance (~$150/mo), and your total PITI payment is around $2,487/month. With less than 20% down, add PMI ($100-200/month).
How much income do I need to buy a $400,000 house?
Using the 28/36 rule, you need enough income so housing costs don't exceed 28% of gross income. For a $400,000 home with 20% down at 6.25%, your PITI is ~$2,500/month. This requires approximately $107,000 annual income ($8,900/month gross). With 10% down and PMI, you'd need ~$115,000-120,000 income.
What is a good mortgage rate right now (December 2025)?
According to Freddie Mac's Primary Mortgage Market Survey (December 18, 2025), the national averages are: 30-year fixed = 6.21%, 15-year fixed = 5.47%. A "good" rate is anything below the average. Borrowers with excellent credit (760+) and 20%+ down typically get rates 0.25-0.5% below average. Rates vary by lender, so always compare.
Is it better to put 10% or 20% down on a house?
20% down avoids PMI and gives you instant equity, but requires more cash upfront. 10% down lets you buy sooner with less savings. For a $400,000 home: 20% down = $80,000 upfront, no PMI. 10% down = $40,000 upfront + ~$200/month PMI until you reach 20% equity. If you can invest the extra $40,000 at higher returns than your mortgage rate, 10% down might be better financially.
How much are closing costs on a house?
Closing costs typically range from 2-5% of the loan amount. On a $320,000 loan, expect $6,400-$16,000. Common costs include: loan origination fee (0.5-1%), appraisal ($300-$700), title insurance ($1,000-$4,000), escrow deposits, attorney fees, and recording fees. Some costs are negotiable, and sellers may offer credits toward buyer closing costs.
What credit score do I need to buy a house?
Minimum scores vary by loan type: Conventional = 620+, FHA = 580+ (or 500 with 10% down), VA = typically 620 (varies by lender), USDA = 640+. However, higher scores get better rates. A borrower with 760+ credit might get 6.0%, while someone with 620 might pay 7.5%—adding hundreds to monthly payments. Check your credit before applying.
🏠 What Is a Mortgage and How Does It Work?
A mortgage is a loan used to purchase real estate, where the property itself serves as collateral. When you take out a mortgage, you agree to repay the borrowed amount (principal) plus interest over a set period, typically 15 or 30 years. If you fail to make payments, the lender can foreclose on the property to recover their investment.
In the United States, approximately 70-90% of all mortgages are conventional 30-year fixed-rate loans. Mortgages are how most Americans purchase homes—according to the National Association of Realtors, only about 26% of home purchases are made with cash.
Understanding PITI: The Four Components of Your Payment
Your total monthly mortgage payment consists of four main components, commonly referred to as PITI:
Principal
The portion that reduces your loan balance. Early in the loan, most of your payment is interest; over time, more goes to principal. This is called amortization.
Interest
The cost of borrowing money, expressed as an annual percentage rate (APR). This is how lenders profit from loans. Lower rates save thousands over the loan's life.
Taxes
Property taxes paid to local government, typically escrowed monthly. The U.S. average is 1.1% of home value annually, but ranges from 0.28% (Hawaii) to 2.49% (New Jersey).
Insurance
Homeowners insurance protects against damage/loss. May also include PMI (Private Mortgage Insurance) if your down payment is less than 20%.
The Home Buying Process: 7 Key Steps
- Check Your Credit: Review your credit reports (free at AnnualCreditReport.com) and improve your score if needed
- Get Pre-Approved: A lender verifies your finances and provides a conditional commitment letter
- Find a Real Estate Agent: An experienced agent helps you navigate the market and negotiate
- House Hunt: Search for homes within your pre-approved budget
- Make an Offer: Submit a purchase agreement; your pre-approval strengthens your offer
- Underwriting & Appraisal: Lender verifies documentation and home value
- Closing: Sign final documents, pay closing costs, get the keys!
📋 Types of Mortgage Loans Explained
Choosing the right mortgage type can save you thousands of dollars. Here are the most common options available to U.S. homebuyers:
Conventional Loans
Not government-backed. Requires 3-20% down and 620+ credit. Best rates with 20% down and 740+ credit. PMI required if under 20% down. Conforming loan limit: $766,550 (2024).
FHA Loans
Government-insured via Federal Housing Administration. 3.5% down with 580+ credit, or 10% down with 500+ credit. Mortgage insurance required for life of loan.
VA Loans
For veterans, active military, and eligible spouses. 0% down payment, no PMI, competitive rates. Requires VA funding fee (1.25-3.3%). Often the best option for eligible buyers.
USDA Loans
For rural and suburban properties. 0% down payment for income-qualified buyers. Property must be in USDA-eligible area. Guarantee fee required.
Loan Type Comparison Chart
| Feature | Conventional | FHA | VA | USDA |
|---|---|---|---|---|
| Min Down Payment | 3% | 3.5% | 0% | 0% |
| Min Credit Score | 620 | 580 | 580-620 | 640 |
| PMI/MI Required? | If <20% down | Yes (MIP) | No | Yes (fee) |
| PMI Removable? | Yes, at 20% equity | No (life of loan) | N/A | Yes |
| Best For | Good credit, 20%+ down | Lower credit, small down payment | Veterans/military | Rural buyers |
Fixed-Rate vs. Adjustable-Rate Mortgages (ARMs)
Beyond loan types, you'll also choose between fixed-rate and adjustable-rate mortgages:
- Fixed-Rate: Interest rate stays the same for the entire loan term. Predictable payments, protection from rising rates. Best for long-term homeowners.
- Adjustable-Rate (ARM): Lower initial rate (e.g., 5/1 ARM is fixed for 5 years, then adjusts annually). Can save money if you plan to sell or refinance within the fixed period. Risk: payments may increase significantly after adjustment.
📊 Current Mortgage Rates (December 2025)
Mortgage rates fluctuate based on economic conditions, Federal Reserve policy, inflation, and bond market movements. Here are the current national averages according to Freddie Mac's Primary Mortgage Market Survey (December 18, 2025):
30-Year Fixed
Most PopularLower monthly payments, more interest over time. Best for those planning to stay 7+ years. Down 0.5% from December 2024 (6.72%).
15-Year Fixed
Best for SavingsHigher monthly payments, massive interest savings (~60% less total interest). Best for those who can afford higher payments.
5/1 ARM
Short-Term OptionFixed for 5 years, then adjusts annually. Best if planning to sell or refinance within 5 years. Risk: rates may rise after fixed period.
Factors That Affect Your Mortgage Rate
- Credit Score: 760+ gets the best rates; below 620 may add 1-2% to your rate
- Down Payment: 20%+ typically qualifies for better rates and avoids PMI
- Loan Type: Conventional may beat FHA rates for well-qualified borrowers
- Property Type: Primary residence gets better rates than investment or second home
- Loan Amount: Jumbo loans (above $766,550 in most areas) may have higher rates
- Discount Points: Paying 1 point (1% of loan) upfront typically lowers rate by 0.25%
- Debt-to-Income Ratio: Lower DTI (<36%) improves your rate
📈 Rate Forecast
According to Fannie Mae and the Mortgage Bankers Association, 30-year mortgage rates are expected to remain in the 6-6.5% range through 2025-2026, potentially dipping to 5.9% by late 2026 as inflation moderates. However, rates are notoriously difficult to predict—focus on what you can control (credit score, down payment, shopping around).
🔒 Understanding PMI (Private Mortgage Insurance)
Private Mortgage Insurance (PMI) is required by lenders when your down payment is less than 20% of the home's purchase price. It protects the lender (not you) if you default on the loan. While PMI adds to your monthly costs, it enables buyers to purchase homes with smaller down payments.
How Much Does PMI Cost?
PMI typically costs 0.5% to 1.5% of the loan amount annually, paid monthly. Your exact rate depends on:
- Loan-to-value (LTV) ratio: Higher LTV = higher PMI
- Credit score: Lower scores = higher PMI rates
- Loan type and term
📝 PMI Cost Example
Home Price: $400,000
Down Payment: 10% ($40,000)
Loan Amount: $360,000
PMI Rate: 0.75% annually
Annual PMI Cost: $2,700
Monthly PMI: $225/month
Total PMI Until 20% Equity: Approximately $8,100-$13,500 (depending on appreciation and paydown)
How to Remove PMI
- Automatic Termination: By law (Homeowners Protection Act), PMI automatically cancels when your loan balance reaches 78% of original home value
- Request Cancellation at 80%: You can request removal once you reach 80% LTV (20% equity). Must be current on payments with good payment history.
- Refinance: If your home has appreciated, refinance to a new loan with 20%+ equity and no PMI
- Reappraisal: If home values have risen significantly, request a new appraisal to prove 20% equity
Alternatives to PMI
- Piggyback Loan (80-10-10): Put 10% down, take a second mortgage for 10%, and avoid PMI on the primary loan
- Lender-Paid PMI (LPMI): Higher interest rate but no separate PMI payment—can be better if you plan to keep the loan long-term
- VA Loan: No PMI required for eligible veterans (VA funding fee instead)
- Wait and Save: Continue saving until you can put 20% down
⚠️ FHA Mortgage Insurance is Different
FHA loans require MIP (Mortgage Insurance Premium) which works differently: you pay an upfront premium (1.75% of loan, usually financed) plus an annual premium (0.45-1.05%). Important: For FHA loans originated after June 3, 2013 with less than 10% down, MIP is required for the life of the loan—it cannot be removed. Consider refinancing to a conventional loan once you have 20% equity.
💰 Down Payment Guide: How Much Should You Put Down?
The down payment is one of the biggest financial decisions when buying a home. While 20% is the traditional benchmark, many buyers successfully purchase homes with much less.
Down Payment Options by Loan Type
| Down Payment | Loan Type | PMI? | Pros | Cons |
|---|---|---|---|---|
| 0% | VA, USDA | No (VA) / Fee (USDA) | Buy with no savings | Higher payments, start with no equity |
| 3-3.5% | Conventional, FHA | Yes | Low barrier to homeownership | PMI adds $100-300/month |
| 10% | Conventional | Yes (lower) | Balance of savings and equity | Still paying PMI (less than 3%) |
| 20% | Conventional | No | No PMI, best rates, instant equity | Requires significant savings |
10% vs 20% Down: Real Numbers Comparison
For a $400,000 home at 6.25% interest:
10% Down ($40,000)
Loan Amount: $360,000
Monthly P&I: $2,217
PMI (~0.75%): $225/month
Total PITI: ~$2,992/month
20% Down ($80,000)
Loan Amount: $320,000
Monthly P&I: $1,970
PMI: $0
Total PITI: ~$2,520/month
Monthly Savings with 20% Down: $472/month ($5,664/year)
Down Payment Assistance Programs
Many first-time buyers qualify for down payment assistance:
- State Housing Finance Agencies: Every state offers programs—grants, forgivable loans, or low-interest second mortgages
- FHA Gift Funds: FHA allows 100% of down payment to come from gift funds from family
- HomeReady/Home Possible: Fannie Mae and Freddie Mac programs with 3% down and income flexibility
- Employer Programs: Some employers offer housing assistance as a benefit
- Local Programs: Many cities/counties offer assistance for specific neighborhoods or professions (teachers, first responders)
💡 Don't Drain Your Emergency Fund
While a larger down payment saves money, don't empty your savings. Financial advisors recommend keeping 3-6 months of expenses saved after closing. Unexpected repairs, medical bills, or job loss can happen. It's better to pay PMI temporarily than to be house-rich and cash-poor.
⚖️ 15-Year vs 30-Year Mortgage: Which Is Better?
Choosing between a 15-year and 30-year mortgage is one of the most impactful financial decisions you'll make as a homebuyer. Here's a detailed comparison using a $320,000 loan:
30-Year at 6.21%
Monthly Payment: $1,958
Total Interest: $385,021
Total Paid: $705,021
15-Year at 5.47%
Monthly Payment: $2,614
Total Interest: $150,564
Total Paid: $470,564
Interest Savings with 15-Year: $234,457!
When to Choose a 30-Year Mortgage
- You want lower monthly payments for more financial flexibility
- You plan to invest the payment difference (potentially earning more than the interest rate)
- You're at the edge of affordability and need the lower payment to qualify
- You value cash flow flexibility for emergencies, travel, or other goals
- You might refinance when rates drop or pay extra when you can
When to Choose a 15-Year Mortgage
- You can comfortably afford the higher payment (should be <25% of income)
- You're approaching retirement and want to be mortgage-free sooner
- You want the guaranteed "return" of interest savings vs. uncertain investments
- You're disciplined but might not actually invest the monthly difference
- You've already maximized retirement contributions (401k, IRA)
💡 The Best of Both Worlds
Get a 30-year mortgage but make extra principal payments when you can. This gives you flexibility (lower required payment) while still saving interest. Add $200/month extra to a $320,000 30-year loan and you'll save ~$78,000 in interest and pay off almost 6 years early.
📊 The 28/36 Rule: How Much House Can You Afford?
Lenders use the 28/36 rule (also called debt-to-income ratio or DTI) to determine how much you can borrow. Understanding this helps you calculate your realistic home budget.
What Is the 28/36 Rule?
- 28% (Front-End Ratio): Your monthly housing costs (PITI) should not exceed 28% of your gross monthly income
- 36% (Back-End Ratio): Your total monthly debt payments (housing + all other debts) should not exceed 36% of gross income
📝 Example: $100,000 Annual Salary
Gross Monthly Income: $8,333
Max Housing Payment (28%): $2,333/month
Max Total Debt (36%): $3,000/month
Other Monthly Debts: $500 (car + student loans)
Max Housing After Other Debts: $2,500/month (36% - debts)
Estimated Max Home Price: $380,000 - $420,000
(depending on rate, taxes, insurance)
DTI Limits by Loan Type
| Loan Type | Front-End (Housing) | Back-End (Total Debt) |
|---|---|---|
| Conventional | 28% | 36-45% |
| FHA | 31% | 43% |
| VA | No limit | 41% (flexible) |
| USDA | 29% | 41% |
Income Needed for Different Home Prices
Based on 20% down, 6.25% rate, 30-year term, ~$500/mo for taxes/insurance:
| Home Price | Est. Monthly PITI | Income Needed (28%) | Income Needed (36%) |
|---|---|---|---|
| $300,000 | $1,975 | $84,640 | $65,830 |
| $400,000 | $2,520 | $108,000 | $84,000 |
| $500,000 | $3,065 | $131,360 | $102,170 |
| $600,000 | $3,610 | $154,710 | $120,330 |
🔢 The Mortgage Payment Formula Explained
Understanding how your mortgage payment is calculated helps you make informed decisions. Here's the standard amortization formula used by all lenders:
M = Monthly payment (principal + interest only)
P = Principal (loan amount)
r = Monthly interest rate (annual rate ÷ 12)
n = Total number of payments (years × 12)
Step-by-Step Calculation Example
📝 Calculate Payment for $320,000 at 6.25% for 30 years
P (Principal): $320,000
Annual Rate: 6.25%
r (Monthly Rate): 6.25% ÷ 12 = 0.5208% = 0.005208
n (Number of Payments): 30 × 12 = 360
Calculation:
M = $320,000 × [0.005208 × (1.005208)³⁶⁰] / [(1.005208)³⁶⁰ – 1]
Monthly P&I Payment: $1,970.46
How Amortization Works
With each payment, a portion goes to interest and a portion reduces principal. Early in the loan, most goes to interest. Over time, this reverses:
- First payment: $1,667 interest + $303 principal
- Year 10: $1,295 interest + $675 principal
- Year 20: $757 interest + $1,213 principal
- Final payment: $10 interest + $1,960 principal
Quick Estimate Rules of Thumb
For quick estimates without a calculator:
- At 6% for 30 years: ~$6 per $1,000 borrowed (e.g., $300,000 = ~$1,800/mo)
- At 6% for 15 years: ~$8.50 per $1,000 borrowed
- At 7% for 30 years: ~$6.65 per $1,000 borrowed
- Each 1% rate increase: Adds ~$60/month per $100,000 borrowed
⚠️ 10 Common Mortgage Mistakes to Avoid
1. Not Shopping Around
Freddie Mac research shows getting quotes from 5+ lenders can save $3,000+ over the loan's life. Even 0.25% lower rate on $320,000 saves $17,000.
2. Focusing Only on Monthly Payment
A lower payment isn't always better. Longer terms or higher rates cost more over time. Compare total interest paid, not just monthly payments.
3. Making Big Purchases Before Closing
Buying a car, furniture, or opening credit cards before closing can derail your approval. Lenders recheck credit before funding. Wait until after you have the keys.
4. Borrowing the Maximum Approved
Just because you're approved for $500,000 doesn't mean you should spend it. Leave room for savings, emergencies, and enjoying life beyond mortgage payments.
5. Forgetting Closing Costs
Closing costs of 2-5% of loan amount are due at closing—separate from your down payment. On $320,000, that's $6,400-$16,000 you need ready.
6. Draining Your Emergency Fund
Don't put every dollar into the down payment. Keep 3-6 months of expenses saved after closing for repairs, medical bills, or job loss.
7. Skipping Pre-Approval
Shopping without pre-approval wastes time and weakens your offer. Sellers prefer buyers who've been vetted. Get pre-approved before house hunting.
8. Waiving the Home Inspection
Even in competitive markets, skipping inspection is risky. A $400 inspection can reveal $40,000 in problems. At minimum, get an inspection for your information.
9. Ignoring Total Housing Costs
Monthly payment isn't your only cost. Budget for property taxes, insurance, HOA fees, maintenance (~1% of home value/year), and utilities.
10. Not Locking Your Rate
Rates can change daily. Once you find a good rate and have an accepted offer, lock it in. Rate locks typically last 30-60 days. Ask about float-down options.
🏡 First-Time Homebuyer Guide
Buying your first home is exciting but can feel overwhelming. Here's a timeline to prepare:
6+ Months Before Buying
- Check Your Credit: Get free reports from AnnualCreditReport.com. Dispute errors. Work on improving your score.
- Pay Down Debt: Lower your debt-to-income ratio by paying off credit cards and loans.
- Save Aggressively: Target 20% down payment + 3-6 months emergency fund + closing costs (2-5%).
- Avoid New Credit: Don't open new cards, finance cars, or take loans that affect DTI.
- Research Markets: Explore neighborhoods, schools, commute times, and home prices.
2-3 Months Before Buying
- Get Pre-Approved: Shop 3-5 lenders within 14 days (counts as one credit inquiry) to compare rates.
- Choose a Real Estate Agent: Find someone experienced in your target area. Interview 2-3 agents.
- Define Your Must-Haves: List essential features (bedrooms, location, garage) vs. nice-to-haves.
- Gather Documents: Tax returns, W-2s, pay stubs, bank statements—lenders need 2 years of history.
First-Time Buyer Programs
FHA Loans
3.5% down with 580+ credit. Lower requirements but requires MIP for life of loan. Great for first-timers with limited savings.
Fannie Mae HomeReady
3% down for moderate-income buyers (≤80% area median income). Flexible income sources including roommate rent. Reduced PMI.
Freddie Mac Home Possible
3% down for low-to-moderate income buyers. Allows co-borrowers who won't live in the home. Reduced mortgage insurance.
State/Local Programs
Every state has first-time buyer programs offering down payment assistance, grants, or tax credits. Search "[your state] first-time homebuyer programs."
This mortgage calculator uses the standard amortization formula employed by all U.S. lenders. Calculations are based on data from authoritative sources:
- Freddie Mac Primary Mortgage Market Survey® (current rates)
- Consumer Financial Protection Bureau (CFPB) (mortgage regulations)
- Federal Reserve (economic data)
- Fannie Mae (loan guidelines)
- National Association of Realtors (market statistics)
Last reviewed and updated: February 15, 2026. Rate information reflects Freddie Mac PMMS data from December 18, 2025.
❓ Frequently Asked Questions
Your mortgage payment is calculated using the amortization formula: M = P × [r(1+r)^n] / [(1+r)^n – 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of payments. For example, a $320,000 loan at 6.25% for 30 years = $1,970/month for principal and interest. Add property taxes (~$400/mo), insurance (~$150/mo), and potentially PMI for your total PITI payment.
Minimum credit scores vary by loan type: Conventional loans typically require 620+, FHA loans accept 580+ (or 500 with 10% down), VA loans generally need 580-620, and USDA loans require 640+. However, higher scores get better rates. A 760+ score qualifies for the best rates, while scores below 620 may add 1-2 percentage points to your rate, costing thousands over the loan's life.
Use the 28/36 rule: your housing payment should not exceed 28% of gross monthly income (front-end ratio), and total debts should not exceed 36% (back-end ratio). For a $100,000 salary, that's ~$2,333/month for housing (28%). This typically allows a home price of $350,000-$420,000 depending on down payment, rate, and local taxes. Use our Affordability Calculator tab for a personalized estimate.
Private Mortgage Insurance (PMI) is required when you put less than 20% down on a conventional loan. It protects the lender if you default. PMI costs 0.5%-1.5% of the loan annually. By law, PMI automatically terminates at 78% LTV, but you can request removal at 80% LTV (20% equity). Note: FHA loans have MIP which cannot be removed unless you refinance to a conventional loan.
A 30-year mortgage has lower monthly payments but costs more in total interest. A 15-year has higher payments but saves significantly. For a $320,000 loan: 30-year at 6.21% = $1,958/month, $385K total interest. 15-year at 5.47% = $2,614/month, $150K total interest—savings of $235,000! Choose 15-year if you can comfortably afford the higher payment; choose 30-year for flexibility or if you'll invest the difference.
Closing costs typically range from 2-5% of the loan amount. For a $320,000 loan, expect $6,400-$16,000. This includes: origination fees (0.5-1%), appraisal ($300-$700), title insurance ($1,000-$4,000), attorney fees, recording fees, and prepaid taxes/insurance for escrow. Some costs are negotiable, and sellers may contribute toward buyer's closing costs—ask your agent.
Pre-qualification is a quick estimate based on self-reported information—useful for ballpark figures but not verified. Pre-approval is a formal process where the lender verifies your income, assets, and credit, then issues a conditional commitment letter. Pre-approval carries much more weight with sellers and is essentially required to make competitive offers in most markets.
Yes, with certain loan types. VA loans (for veterans, active military, and eligible spouses) require 0% down with no PMI—often the best deal available. USDA loans (for rural/suburban properties) also offer 0% down for income-qualified buyers. Some state programs provide down payment assistance that can effectively enable zero-down purchases for first-time buyers.
Paying points makes sense if you'll stay long enough to break even. One point (1% of loan amount) typically reduces your rate by 0.25%. For a $320,000 loan: 1 point = $3,200, saving ~$50/month. Break-even: 64 months (5.3 years). If you plan to stay 7+ years, points can save money. If you might move or refinance in 3-5 years, skip the points.
Consider refinancing when: (1) you can lower your rate by 0.5-1%+ and plan to stay past the break-even point (closing costs ÷ monthly savings), (2) you want to shorten your loan term, (3) you need cash-out for renovations or debt consolidation, or (4) you want to switch from ARM to fixed rate for stability. Calculate your break-even point before refinancing—typically 2-4 years.
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