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How to use this mortgage calculator
The Ascent's mortgage calculator helps you understand how much a home loan will cost. It also makes it easy to compare loan options. To use the calculator, plug in the following numbers:
- Your desired home price
- The amount of your down payment
- The interest rate on the loan you're considering
- The type of mortgage (the loan term)
You can also put in the cost of home insurance, property taxes, and homeowners association (HOA) fees, if you know them. This will provide a more accurate estimate.
Our mortgage calculator can help you make informed decisions about your loan, including:
- Comparing loan scenarios: Before applying with a mortgage lender, see how different decisions affect your cost, such as borrowing more or making a smaller down payment. Compare multiple scenarios by changing the input amounts.
- Comparing loan types: Change the loan term to see how a shorter or longer payoff time affects loan costs.
- Determine what you can afford: Use the calculator to see the cost of different loan amounts to determine if they fit in your budget.
If you get quotes from different mortgage or refinance lenders, you can also use the calculator to see how much each loan costs.
Frequently asked questions about mortgages
How do I qualify for a mortgage?
To qualify for a mortgage or refinance lender, shop around with several lenders. When you find one offering the best rates and terms, make sure you meet its qualifying requirements. These relate to your income, debt, and credit score.
You will need to provide information on your finances, so gather documents such as pay stubs and bank statements. Once you've found the right loan and have your paperwork ready, submit an application. For more information, or if you're ready to go, use our form to help guide you through the process to get a mortgage pre-approval.
Can I get a mortgage with no credit?
Yes. Most lenders look at your credit report and score when determining if you can qualify for a home loan. However, some lenders will work with borrowers who don't have a credit history. They can review other documentation, such as utility statements, showing you have a history of making on-time payments.
You will need to shop around for a lender that does manual underwriting and prepare financial documentation such as bank statements to get approved. Find out more in this guide on how to buy a house with no credit.
How much house can I afford?
The amount you can afford to spend on a house depends on many factors. Your down payment is important. A larger down payment means you generally can afford a home that's more expensive. Your credit score, income, and other debt also affect what you can borrow. However, you may not want to borrow the maximum allowed.
Generally, experts recommend you keep housing costs below 30% of your income. This includes your mortgage, utilities, HOA fees, insurance, taxes, and other costs. Staying below this threshold ensures mortgage payments won't compromise other financial goals. You can also find out other details to consider in our guide to figuring out how much house you can afford.
What does a mortgage payment include?
Your monthly mortgage payment includes:
- Principal: This is the amount you pay toward the loan balance each month so your loan is paid on time.
- Interest: This is the cost you pay for borrowing. It's determined by how much you borrowed and your interest rate.
- Taxes: Most lenders collect a payment toward your property taxes each month. This money is put into an escrow account. That's a special account earmarked for you and held by a trusted party. The lender pays the property tax bill out of the escrow account.
- Insurance: Lenders also collect a monthly payment toward homeowners insurance. This is also put into escrow. Lenders then pay your insurance bill. The purpose is to protect the collateral (the house) by making sure the bills are paid.
What mortgage type should I choose?
The type of mortgage you should choose depends on many factors, including your credit history, your down payment amount, the type of house you're buying, and your goals for your loan. For example, you may wish to choose a:
- Conventional mortgage (one not guaranteed by the government) if you want to avoid up-front fees.
- A government guaranteed mortgage (such as an FHA, USDA, or VA loan) if you have imperfect credit or a small down payment.
- A 30-year fixed rate loan if you want predictable payments and don't mind paying more interest over time in exchange for a smaller monthly payment.
- A 15-year fixed rate loan if you want predictable payments and want to pay the least amount of interest over time even if that means a higher monthly mortgage payment.
These are just a few examples of different home loans. Make sure to research all the available mortgage types before you decide.
What is the difference between pre-qualified and pre-approved?
Getting pre-qualified for a mortgage involves submitting a small amount of financial information to find out what your mortgage loan terms would likely be. It's a quick process that shouldn't affect your credit score.
Getting pre-approved involves submitting a large amount of financial information. Lenders commit to providing a loan if your financial situation doesn't change and the home you want to purchase meets their criteria. Pre-approval is usually required by home sellers when you make an offer, and it's a much more involved process.
Learn more about the difference between mortgage pre-qualification vs. pre-approval before shopping for a home.
What can I expect in the home-buying process?
To begin the process of buying a home, you'll need to set a budget and ensure you're financially prepared to qualify for a home loan and pay a mortgage. You should prepare the financial documents that mortgage lenders will want to review. Get quotes from several lenders and pursue mortgage pre-approval from the one offering the best terms.
You may want to hire a real estate agent to help you shop for properties. When you find a home that fits your budget and criteria, make an offer. Be sure to include contingencies or conditions that must be met, such as a satisfactory inspection. Complete the formal loan approval process for the mortgage loan that best fits your needs and close on your transaction.
This home-buyer checklist provides more insight into each of these steps, so check it out before you start shopping for a property.
How much should you save for a down payment?
Ideally, you will make a down payment that is equal to 20% of the value of the property. So if you're buying a $200,000 home, save $40,000.
However, many people don't save this much for a down payment. You could potentially qualify for a conventional loan (not backed by the government) with as little as 3% down. Some government-backed loans don't require a down payment at all. But if you don't make a down payment or you make a small one, you can expect to pay mortgage insurance or other upfront fees.
Whether you plan to save 20% or not, be sure to look into how to save for a down payment.
What documents do you need to apply for a mortgage?
To apply for a mortgage, you will need:
- Proof of income, such as tax returns, pay stubs, W-2s, or 1099 tax forms
- Proof of assets, such as bank statements and investment account statements
- A gift letter if someone is providing you with gift money for a down payment
- A history of mortgage or rent payments, such as information from your landlord
- Identification, which could include a Social Security card and government-issued ID
Lenders may also request additional information, so be sure to read up on what documents are required for home loans.
What expenses of homeownership do I need to prepare for?
Expenses of homeownership to prepare for include:
- Your mortgage payment, which is paid to your lender
- Property taxes, which are often added to your mortgage payment (your lender puts the money into a special escrow account and then pays your local government the taxes for you)
- Homeowners insurance, which is also often added to your mortgage payment and paid by your lender. Check out our guide to determine how much homeowners insurance you may need
- Mortgage insurance, which is insurance that protects the lender from potential losses if you make a down payment below 20% of your home's value
- Utilities, including electricity, gas, water, cable, and internet
- HOA dues if you live in a neighborhood or building with a homeowner's association
- Home maintenance and repairs so you aren't caught off guard by surprise expenses
You can learn more about these costs in this guide to homeownership expenses.
What's the difference between a 15- and a 30-year mortgage?
A 15-year mortgage is a home loan that's paid off in half the time of a 30-year loan. With a 15-year loan, you make payments for just 15 years as opposed to 30 years.
The monthly amount you owe is higher on a 15-year loan than a 30-year loan because you make fewer payments. The interest rate is usually lower on a 15-year loan, though. And total interest costs are lower because you pay interest for less time.
Carefully consider the pros and cons of a 15- vs. 30-year mortgage when you decide which is right for you. Additionally, you can explore 20- vs. 30-year mortgages as an option.
What tips would you give first-time home buyers?
Some of the best tips for first-time home buyers include:
- Saving early for a down payment
- Taking steps to improve your credit score
- Setting a budget before shopping for a home
- Shopping around for the most favorable mortgage interest rate and loan terms
- Getting pre-approved before making an offer on a home
- Hiring a real estate agent with solid credentials who you feel comfortable working with
- Researching properties carefully, considering factors such as zoning laws and school districts
- Making an offer that protects your interest, including contingencies, such as an inspection to check for major issuesis
- Saving up money for closing costs
For more information, look at our first-time home-buyer tips.
Why does my debt-to-income ratio matter when applying for a mortgage?
Lenders consider your debt-to-income ratio when you apply for a mortgage because they want to make sure you can afford mortgage payments. They look at your:
- Front-end ratio, which compares your monthly mortgage payments to your income
- Back-end ratio, which compares mortgage payments and other debts to your income
If either ratio is too high, you won't be approved for your loan. For more information about lender requirements, read up on debt-to-income ratio and why it matters.
How does my credit score affect mortgage rates?
A higher credit score can result in a lower mortgage rate. That's because lenders will view you as a low-risk borrower. A lower mortgage rate means lower monthly payments and less total interest paid over time.
A credit score on the low end can make it difficult to get approved for a loan. And lenders that do agree to provide a mortgage will charge a higher rate. That's because your past credit problems suggest there's a greater chance you'll default on your loan.
Find out more about this impact by looking into how credit scores affect mortgage rates.
The Ascent's best mortgage lenders
If you want to uncover more about the best mortgage lenders for low rates and fees, our experts have created a shortlist of the top mortgage companies. Some of our experts have even used these lenders themselves to cut their costs.
About the Author
Christy Bieber is a full-time personal finance and legal writer with more than a decade of experience. She has a JD from UCLA as well as a degree in English, Media and Communications with a Certificate in Business Management from the University of Rochester. In addition to writing for The Ascent and The Motley Fool, her work has also been featured regularly on MSN Money, CNBC, and USA Today. She also ghost writes textbooks, serves as a subject matter expert for online course design, and is a former college instructor.
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