Home Price
Let’s break it down further. Home price, the first input, is based on your income, monthly debt payment, credit score, and down payment savings. A percentage you may hear when buying a home is the 36% rule. The rule states that you should aim for a debt-to-income (DTI) ratio of roughly 36% or less (or 43% maximum for an FHA loan) when applying for a mortgage loan. This ratio helps your lender understand your financial capacity to pay your monthly mortgage. The higher the percentage, the less likely you can afford the mortgage.
To calculate your DTI, add all your monthly debt payments, such as credit card debt, student loans, alimony or child support, auto loans, and projected mortgage payments. Next, divide by your monthly, pre-tax income. To get a percentage, multiply by 100. The number you’re left with is your DTI.
DTI = Total monthly debt payments ÷ gross monthly income x 100.
Down Payment
In general, a 20% down payment is what most mortgage lenders expect for a conventional loan with no private mortgage insurance (PMI). Of course, there are exceptions. For example, VA loans don’t require down payments, and FHA loans often allow as low as a 3% down payment (but come with a version of mortgage insurance). Additionally, some lenders have programs offering mortgages with down prices as low as 3% – 5%. The table below shows how the size of your down payment will affect your monthly mortgage.
How a Larger Down Payment Impacts Monthly Payments
| Percentage |
Down Payment |
Home Price |
Principal & Interest |
| 20% |
$40,000 |
$200,000 |
$804 |
| 15% |
$30,000 |
$200,000 |
$854 |
| 10% |
$20,000 |
$200,000 |
$905 |
| 5% |
$12,500 |
$200,000 |
$955 |
| 0% |
$0 |
$200,000 |
$1,005 |
*The payment is principal and interest only; to get the total monthly payment, add your property taxes, homeowners insurance, and private mortgage insurance (PMI) for down payments below 20%.
Most homebuyers should aim to save 20% of their desired home price before applying for a mortgage. Making a sizeable down payment improves your chances of qualifying for the best mortgage rates. Your credit score and income are two additional factors that will play a role in determining your mortgage rate.
Interest Rate
For the mortgage rate box, you can see what you’d qualify for with our mortgage rates comparison tool. Or, you can use the interest rate a potential lender gave you when you went through the preapproval process or spoke with a mortgage broker. If you don’t know what you’d qualify for, you can always put an estimated rate by using the current trends found on our site or your lender’s mortgage page. Remember, your mortgage rate is based on several factors, including your credit score and debt-to-income ratio.
Mortgage Term
In the drop-down area, you can select a 30-year fixed-rate mortgage, 15-year fixed-rate mortgage, or 5/1 ARM. The first two options, as their name indicates, are fixed-rate loans. This means your interest rate and monthly payments stay the same over the entire loan. An ARM, or adjustable-rate mortgage, has an interest rate that will change after an initial fixed-rate period. An ARM’s interest rate will change once a year following the introductory period. Depending on the economic climate, your rate can increase or decrease. Most people choose 30-year fixed-rate loans, but if you’re planning on moving in a few years or flipping the house, an ARM can offer you a lower initial rate.
Homeowner’s Insurance
Home insurance is generally a requirement to secure a home mortgage loan. The premium is usually included with the monthly mortgage payment. Costs and coverage vary by state and the value of the home. At Rogue Risk, we make sure you have the proper range. You can get a home insurance quote today.
Homeowner’s insurance can cover the cost to repair or rebuild due to damage caused by events like fire, windstorms, hail, lightning, theft, or vandalism. It can also protect your possessions inside your home, like clothes, furniture, and electronics.
Monthly HOA Fees
Fees are due in exchange for being part of a homeowner’s association. A homeowner’s association is an organization in a planned community that maintains and reinforces rules for the properties in its jurisdiction. The homeowner agrees to the HOA’s rules and fees by purchasing a property in such a community. HOAs maintain a significant amount of legal power over property owners regarding the outside conditions of the home.
Annual Taxes
Taxes are levied based on the government’s appraisal of your property. These are usually included as part of your monthly mortgage payment. Property taxes vary greatly depending on location and home price. National state averages range from 0.32% to 2.31%
