Figuring out what you’ll pay monthly for your mortgage is easy. Just fill in the details, using the mortgage calculator above, to get an estimate of your monthly mortgage payment.

Estimated Home Value:

If you are buying a house, enter the price of the property you are considering. If you’re refinancing your home loan, enter your home’s current value.

Down Payment:

If you are buying a house, enter the amount of your down payment. If you are refinancing, enter the amount of equity you have in the property.

Equity = Estimated Home Value - Present Loan Balance

Loan Amount:

This will automatically calculate for you based on your estimated home value and down payment amounts

Loan Amount = Estimated Home Value - Down Payment

Interest Rate:

Enter the interest rate you estimate you will pay on your mortgage loan. Your interest rate can vary by the type of mortgage you choose, the term of your loan and the rate for which you qualify. If you are wondering about today’s interest rates, start your application now.

Term:

This is the number of years it will take to pay off your mortgage. Typically, a mortgage loan is either a 15- or 30-year term, but there are other options. If you are refinancing your home to a shorter or longer term, you can adjust the term length and see the difference it will make to your monthly mortgage payment. Paying additional dollars each month on your mortgage principal may reduce the length of your term.

Annual Property Tax:

Property taxes vary not only by state, but by county, too. You can estimate your annual property taxes by taking the assessed value of your home and multiplying it by your local property tax rate.

For example, if you want to know the amount of your annual property tax for a $100,000 house in Omaha, Nebraska, you would multiply $100,000 by the Omaha property tax rate of 2.38% for a total of $2,388.00. To estimate the property tax in your city/town and state, visit this website.

Annual Property Insurance:

The premium for your annual property insurance can vary depending on your location and the insurance company that underwrites your policy.

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]

Defined Variables:

• P = principal loan amount
• i = monthly interest rate
• n = number of months required to repay your home loan

Keep in mind that this formula does not include property taxes and insurance (P&I). In order to include P&I in your estimate, you’ll need a quote from your insurance company and an estimate of your local property tax. Not a math whiz? Use the mortgage calculator above!

There is more to your mortgage payment than just principal and interest (P&I). Your monthly payment will also fund your escrow account, which pays out your P&I. Depending upon the type of loan you get, you may pay for private mortgage insurance as well.

Principal:

This is the amount you borrowed. Each payment you make will decrease the amount you owe on your loan. At first, you’ll pay less on principal and more on interest but overtime your interest payment will decrease and more of your monthly payment will go towards the principal. Want to pay off your mortgage sooner? Make sure that any extra payments you make are allocated to the principal.

Interest:

The annual percentage rate the lender charges in order to lend you money for your mortgage or refinance. This could be a fixed percent or an adjustable percent based on the type of mortgage you choose.

Annual Interest vs APR:

Annual Interest is your cost to borrow the principal for your mortgage each year. The Annual Percentage Rate (APR) is your total cost to borrow. This would include the interest rate plus additional fees and some closing costs which would include loan origination fees and discount points.

Property Taxes:

The amount of taxes you’ll pay annually based on the property assessment performed by your county assessor. The lender that services your mortgage will “hold” some of the money you are paying monthly into in an escrow account, and from that account, your property taxes are paid when due.

Property Insurance:

This is the monthly premium you pay for homeowners (sometimes called hazard) insurance, insuring your dwelling and its contents against loss. You will choose coverage and the insurance provider with whom you wish to do business. Like your property taxes, this expense is paid from your escrow account when your premium comes due.

Private Mortgage Insurance (PMI):

Depending on the type of mortgage loan you choose and the amount of your down payment, you may need to pay private mortgage insurance. This insures the lender should a borrower discontinue making payments and default on their home loan. Depending on the type of loan you choose, you’ll pay PMI until your home equity reaches twenty percent or for the life of the loan.

To figure out how much house you can afford and estimate the loan amount you will be approved to borrow, you’ll need to know the following: your monthly household income before taxes; your down payment amount; and how much you pay towards debt each month—such as car payments and credit cards. This will help you and your loan officer determine your debt-to-income ratio (DTI).

Total Debts / Monthly Income (Gross) = DTI

Mortgage lenders use your DTI to determine how much you can afford to borrow. Typically, you’ll want your DTI below 36%. Add all your monthly debts (payments) and divide them by your gross monthly income (pay, before taxes).

Here’s an example:

You pay $500 a month total for your car and student loans and gross $4000 a month in pay. Use the formula: $500 / $4000 = 12%. That is your current debt to income ratio! If you want to know how much house you can afford take the typical DTI ratio (36%) and subtract your current DTI ratio (12%) which leaves you with 24%. Multiply that percentage by your gross monthly income (.24 x $4000 = $960). Ideally, you would want to keep your monthly mortgage payment below $960 to maintain the ideal debt-to-income ratio.

There are six different mortgage types you should consider when shopping for a home loan.

30-year fixed rate mortgage:

This conventional home loan is one of the most common. Your interest rate will never change and the term allows for a lower monthly payment stretched over a longer period of time. If you want to shorten the time it will take to pay off your mortgage, this type of home loan gives you the flexibility to make extra payments towards your principal balance.

15-year fixed rate mortgage:

This type of home loan is similar to the 30-year fixed rate mortgage except that it has a shorter term. The interest rate is “fixed” and will not change. A 15-year fixed rate mortgage offers a lower interest rate than the 30-year mortgage but your monthly payments will be higher. Not only will your interest rate be lower, but you will also pay less in interest over the life of the loan due to the shorter term.

Adjustable-rate mortgage (ARM):

An ARM usually starts out with a fixed rate for a short term and then, the interest rate adjusts annually. The initial term can range from 1-year, 5-year to 10-year. For example a 5/1 ARM Mortgage would have a 5-year fixed rate then, switch to an interest rate that would adjust each year.

FHA mortgage:

An FHA loan is a type of mortgage insured by the Federal Housing Administration. FHA loans allow for a lower down payment, and it’s possible you may quality for an FHA with a credit score lower than necessary for a conventional loan.

VA mortgage:

Designed for veterans and military service members, a VA mortgage is backed by the Department of Veteran Affairs. There is no down payment required for a VA home loan and no private mortgage insurance however, there is an upfront VA funding fee required.

USDA mortgage:

Backed by the U.S. Department of Agriculture, USDA home loans are typically available if you’re buying a home in a rural area. No down payment is required, loans and grants are available for home improvement, but there is a cap as to how much you can borrow and you must meet income limits to qualify.