Mortgage Calculator

Costs Included in a Mortgage Payment

Principal: The amount you borrowed and what's left to pay.

Interest: The cost of financing your home.

Taxes: Property taxes fund local public services.

Insurance: Homeowners insurance protects your home from risks like fires and theft. Private mortgage insurance (PMI) protects your lender if you default.

Some people also finance their closing costs, rolling those payments into their mortgage.

Understanding Your Mortgage Calculator Results

Home Price: The amount you expect to pay for the home, influenced by size, location, and market conditions.

Loan Terms: The length of your mortgage (10, 15, 20, 25, or 30 years), affecting total interest and monthly payments.

Loan APR: The annual percentage rate, combining interest rate, lender fees, and closing costs to show the true borrowing cost.

Property Taxes: Taxes based on your home's value and location, varying yearly.

Homeowners Insurance: Protection for your home against risks like fires and theft, with costs varying by location and policy.

HOA Fees: Fees for maintenance and upkeep in planned communities, paid annually or monthly.

Down Payment: Your initial payment towards the home, influencing your monthly payments—the higher the down payment, the lower the monthly cost.

How Much Home Can I Afford?

Debt-to-Income Ratio (DTI): This is the percentage of your monthly income that goes toward debt payments, including credit cards, loans, and your future mortgage. Lenders prefer a DTI between 36% and 50%.

Steady Income: A consistent income is crucial for budgeting and saving for a home. It also shows lenders you can repay the loan. Prove your income with bank statements, pay stubs, or W-2s.

Payment History: A history of on-time bill payments signals reliability to lenders and helps you understand your ability to manage a mortgage.

Down Payment: Deciding your down payment is crucial. A higher down payment increases mortgage approval chances, reduces borrowing, and improves terms. Minimum requirements vary by loan type, so explore your options.

Credit Score: Your credit score, influenced by credit types, age, total debt, and recent debt, significantly affects your home loan terms. It's a key factor in determining what you can afford.

How to Lower Your Monthly Mortgage Payment

Avoid PMI: A down payment of at least 20% eliminates private mortgage insurance, especially important for FHA loans.

Buy a Smaller Home: A smaller loan means a lower purchase price and reduced monthly payments.

Extend Loan Term: Longer loan terms lower monthly payments but increase total interest paid.

Secure a Lower Interest Rate: A larger down payment can also lower your interest rate.

Why Might My Mortgage Payments Increase?

Adjustable-Rate Mortgage (ARM): After the initial fixed period, the interest rate can fluctuate based on market conditions, such as the Prime Rate or U.S. Treasury bill rates.

Increased Property Taxes: Property taxes can rise due to home improvements, neighborhood enhancements, or local government needs.

Higher Homeowners Insurance: Insurance premiums can increase due to claims, home improvements, added risk factors (like a pool), or external factors like inflation and construction costs.

Common Mortgage Types: Which is Right for You?

Conventional Loan: Not government-insured, offering flexible terms and conditions. Typically requires a down payment as low as 3%.

FHA Loan: Insured by the Federal Housing Administration, ideal for those who don't qualify for Conventional loans.

VA Loan: Guaranteed by the Department of Veterans Affairs, exclusively for active-duty military, Veterans, and certain spouses. Benefits include lower interest rates, no down payment, and no monthly mortgage insurance.

Browse our mortgage loan options page for more information on the loan types we offer.

Additional Uses for Our Mortgage Calculator

Plan Early Payoff: Determine the feasibility of paying off your mortgage early by entering additional monthly payments.

Evaluate ARMs: Compare initial savings of an Adjustable-Rate Mortgage (ARM) with a Conventional Fixed-Rate Mortgage to see if an ARM suits your needs.

Eliminate PMI: Discover when you can remove Private Mortgage Insurance (PMI) by using the amortization schedule. PMI is typically required with less than a 20% down payment but can be canceled once you exceed 20% equity.

Amortization of a Mortgage Loan

Amortization is the process of gradually paying off your home mortgage loan through regular, scheduled payments. Each payment covers both interest and a portion of the principal (the amount you borrowed). Over time, the amount going towards interest decreases, while the amount going towards the principal increases. This ensures that by the end of your loan term, your mortgage is fully paid off. An amortization schedule helps you see exactly how each payment is applied and how your loan balance decreases over time.

Have more questions? Contact New American Funding today for personalized assistance.