Use our mortgage calculator to get an idea of your monthly payment by adjusting the interest rate, down payment, home price and more. To find out how you can pay off your mortgage faster, try our mortgage payoff calculator.
Common Mortgage Questions
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What happens when you qualify for a loan?
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To begin the mortgage process, you’ll need to meet with a lender and be prepared to provide proof of:
- Where you work
- Your income
- Any debt you have
- Your assets
- How much you plan to put down on your home
It’s likely your lender will approve you for more money than you should borrow.Just because youqualifyfor a big loan doesn't mean you canaffordit!
A good lender will clearly explain your mortgage optionsand answer all your questions so you feel confident in your decision. If they don’t,find a new lender. A mortgage is a huge financial commitment, and you should never sign up for something you don’t understand!
If you’re ready to get prequalified for a mortgage loan,we recommend talking with Churchill Mortgage.
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Can you get a home mortgage loan without a credit score?
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The answer is,yes! If you apply for a mortgage without a credit score, you’ll need to go through a process called manual underwriting. Manual underwriting simply means you’ll be asked to provide additional paperwork—like paystubs and bank statements—for the underwriter to review. This is so they can evaluate your ability to repay a loan. Your loan process may take a little longer, but buying a home without the strain of extra debt is worth it! Keep in mind, not having a credit score is different than having a low credit score. A low credit score means you have debt, but having no credit score means you don’t like debt!
Related: The Truth About Your Credit Score
Not every lender offers manual underwriting. Do a little research on the front end to find the ones in your area that will.
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What's the difference between being prequalified and preapproved?
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A quick conversation with your lender about your income, assets and down payment is all it takes to get prequalified. But if you want to get preapproved, your lender will need to verify your financial information and submit your loan for preliminary underwriting. A preapproval takes a little more time and documentation, but it also carries a lot more weight when you’re ready to make an offer on a home.
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How much home can you afford?
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Buying too much house can quickly turn your home into a liability instead of an asset. That’s why it’s important to knowwhat you can affordbefore you ever start looking at homes with yourreal estate agent.
We recommend keeping your mortgage payment to 25% or less of your monthly take-home pay.For example, if you bring home $5,000 a month, your monthly mortgage payment should be no more than $1,250.Using our easy mortgage calculator, you’ll find that means you can afford a $211,000 home on a 15-year fixed-rate loan at a 4% interest rate with a 20% down payment.
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How much should you save for a down payment?
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Save up a down payment of at least 20% so you won’t have to pay private mortgage insurance (PMI). PMI is an extra cost added to your monthly payment that doesn’t go toward paying off your mortgage. If you’re a first-time home buyer, a smaller down payment of 5–10% is okay too—but then you will have to pay PMI. No matter what, make sure your monthly payment is no more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage. And stay away from VA and FHA loans!
Saving a big down payment takes hard work and patience, but it's worth it. Here's why:
- You’ll have built-in equity when you move into your home.
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Which home mortgage option is right for you?
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With so manymortgage optionsout there, it can be hard to know how each would impact you in the long run. Here are the most common mortgage loan types:
- Adjustable-Rate Mortgage (ARM)
- Federal Housing Administration (FHA) Loan
- Department of Vertans Affairs (VA) Loan
- Fixed-Rate Conventional Loan
We recommend choosing a 15-year fixed-rate conventional loan. Why not a 30-year mortgage? Because you’llpay thousands more in interest if you go with a 30-year mortgage. For a $250,000 loan, that could mean a difference of more than $100,000!
A 15-year loan does come with a higher monthly payment, so you may need to adjust your home-buying budget to get your mortgage payment down to 25% or less of your monthly income.
But the good news is, a 15-year mortgage is actually paid off in 15 years.Why be in debt for 30 years when you can knock out your mortgage in half the time and save six figures in interest?That’s a win-win!
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How will interest rates affect your home loan?
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Before you lock in an interest rate, it’s worth knowing that high interest rates bring higher monthly payments and increase the amount of interest you’ll pay over the life of your loan. In contrast, a low interest rate saves you money in both the short and long term.
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What does your mortgage payment include?
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Here’s what the typical monthly mortgage payment includes:
- Principal
- Interest
- Homeowner's insurance
- Property taxes
- Private mortgage insurance (PMI), if you put less than 20% down on your home
If you want to pay more on your mortgage, be sure to specify you want any extra money to go toward the principalonly, not an advance payment that prepays interest.
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What happens after you get preapproved for a home mortgage loan?
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Getting preapproved for a mortgage is just the beginning. Once the financial pieces are in place, it’s time to find your perfect home! While it’s one of the most exciting stages of the process, it can also be the most stressful.That’s why it’s important to partner with a buyer’s agent.
A buyer’s agent can guide you through the process of finding a home, negotiating the contract, and closing on your new place. The best part? Working with a buyer’s agent doesn’t cost you a thing! That’s because, in most cases, the seller pays the agent’s commission. Through our Endorsed Local Providers(ELP) program, our team can match you with the top real estate agents we recommend in your area.
Explanation of Mortgage Terms
Mortgage terminology can be confusing and overly complicated—but it doesn’t have to be! We’ve broken down some of the terms to help make them easier to understand.
Learn about
Home Price
Across the country,average home priceshave been going up. Despite the rise in home prices, you can still find a perfect home that’s within your budget! As you begin to house hunt, just make sure to consider the most important question:How much house can I afford?After all, you want your home to be a blessing, not a burden.
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Down Payment
The initial cash payment, usually represented as a percentage of the total purchase price, a home buyer makes when purchasing a home. For example, a 20% down payment on a $200,000 house is $40,000. A 20% down payment typically allows you to avoid private mortgage insurance (PMI). The higher your down payment, the less interest you pay over the life of your home loan. The best way to pay for a home is with a 100% down payment in cash! Not only does it set you up for building wealth, but it also streamlines the real estate process.
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Mortgage Types
15-Year Fixed-Rate Mortgage
A home loan designed to be paid over a term of 15 years. The interest rate remains the same for the life of the loan. A 15-year mortgage will have a higher monthly payment but a lower interest rate than a 30-year mortgage. Because you pay more toward the principal amount each month, you’ll build equity in your home faster, be out of debt sooner, and save thousands of dollars in interest payments.
30-Year Fixed-Rate Mortgage
A home loan designed to be paid over a term of 30 years. The interest rate remains the same for the life of the loan. A 30-year mortgage will have the lowest monthly payment amount but usually carries the highest interest rate—which means you’ll pay much more over the life of the loan. Unless you like the idea of paying thousands of dollars more for your home than you have to and staying in debt twice as long as you need to, opt for a 15-year mortgage if you’re not paying cash for your home.
5/1 Adjustable-Rate Mortgage (ARM)
A home loan designed to be paid over a term of 30 years. The interest rate does not change for the first five years of the loan. After that time period, however, it adjusts annually based on market trends until the loan is paid off. The interest rates are usually comparable to a 30-year mortgage, but ARMs transfer the risk of rising interest rates to you—the homeowner.
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Interest Rate
The ongoing cost of financing a home purchase. This is generally shown as an annual percentage of the outstanding loan. For example, a 5% interest rate on a $200,000 mortgage balance would add $833 to the monthly payment. As the balance is paid down through monthly payments, the interest portion of your payment is reduced.
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Private Mortgage Insurance (PMI)
This is calculated as a percentage of your original loan amount, and is based on your credit score and down payment. PMI protects the lender in case you don’t pay your mortgage, and it slaps an extra fee on top of your monthly payment that doesn’t apply to your loan balance. In most cases, you can avoid PMI if you put at least 20% down on your home purchase.
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Homeowner’s Insurance
Generally a requirement for any home mortgage. The premium is usually included with the monthly mortgage payment. Costs and coverage vary by state and the value of the home. Get professional advice to make sure you have the proper coverage. 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.
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Homeowner’s Association (HOA) Fees
Fees 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. By purchasing a property in such a community, the homeowner is agreeing to the HOA’s rules and fees. HOAs maintain a significant amount of legal power over property owners regarding the outside conditions of the home.
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Monthly Payment
The amount you pay each month for your mortgage, homeowner’s insurance, and HOA fees. This payment should beno more than 25% of your monthly take-home pay. That leaves plenty of room in your budget to achieve other goals, like saving for retirement or putting money aside for your kid’s college fund.
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Property Taxes
Taxes you have to paybased 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.
Mortgage Calculator Uses
Using an online mortgage calculator can help you quickly and accurately predict your monthly mortgage payment with just a few pieces of information. It can also show you the total amount of interest you’ll pay over the life of your mortgage.
Understand Your Mortgage Payment
A monthly mortgage payment is made up of many different costs. Our mortgage calculator’s payment breakdown can show you exactly where your estimated payment will go: principal and interest (P&I), homeowner’s insurance, property taxes, and private mortgage insurance (PMI).
Compare Different Mortgage Types
Don’t know which mortgage is right for you? Use our mortgage calculator to estimate the cost of different loan types and compare interest paid for a 15-year mortgage and a 30-year mortgage. You may be surprised to see how much you can save in interest by getting a 15-year fixed-rate mortgage.
Calculate Your Down Payment
Considering what to offer on a home? Change the home price in the loan calculator to see if going under or above the asking price still fits within your budget.
You can also use our mortgage payment calculator to see the impact of making a higher down payment. A higher down payment will lower your monthly payments not only because it reduces the amount of money you borrow, but also because it can help you qualify for a lower interest rate. In some cases, a down payment of at least 20% of the home’s purchase price can help you avoid paying private mortgage insurance (PMI).
Ready to take the next step?
Find a Real Estate Agent
Shopping for a house is easier with a vetted professional on your side. RamseyTrusted pros are ready to help.
Get Preapproved for a Mortgage
When you find your dream home, you don't have to wonder if you can actually afford it. Churchill can help you get ahead.
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Now, let's delve into the concepts mentioned in the article:
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Mortgage Calculator:
- Allows users to estimate their monthly mortgage payments by adjusting parameters like interest rate, down payment, and home price.
- Helpful for prospective homebuyers to plan their budget and understand affordability.
-
Mortgage Payoff Calculator:
- A tool to determine how to pay off the mortgage faster.
- Aids in financial planning and strategizing for quicker homeownership.
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Qualifying for a Loan:
- Initial step involves meeting with a lender and providing proof of employment, income, debts, assets, and planned down payment.
- Caution against borrowing the maximum amount approved, emphasizing the importance of understanding mortgage options.
-
Getting a Home Mortgage Loan without a Credit Score:
- Possible through manual underwriting, requiring additional paperwork to evaluate repayment ability.
- Distinction between having no credit score and having a low credit score.
-
Prequalification vs. Preapproval:
- Prequalification involves a quick conversation, while preapproval requires verification of financial information and preliminary underwriting.
- Preapproval holds more weight when making an offer on a home.
-
Determining Affordability:
- Advises keeping mortgage payments to 25% or less of monthly take-home pay.
- Recommends using a mortgage calculator to understand affordability based on various parameters.
-
Saving for a Down Payment:
- Suggests saving at least 20% to avoid private mortgage insurance (PMI).
- Highlights the benefits of building equity with a substantial down payment.
-
Choosing the Right Mortgage Option:
- Common mortgage types include Adjustable-Rate Mortgage (ARM), Federal Housing Administration (FHA) Loan, Department of Veterans Affairs (VA) Loan, and Fixed-Rate Conventional Loan.
- Advocates for a 15-year fixed-rate conventional loan over a 30-year mortgage to save on interest.
-
Impact of Interest Rates:
- High interest rates result in higher monthly payments and increased long-term interest payments.
- Low interest rates save money in both the short and long term.
-
Components of Mortgage Payments:
- Monthly payments include principal, interest, homeowner's insurance, property taxes, and PMI if the down payment is less than 20%.
-
After Getting Preapproved:
- Emphasizes the importance of working with a buyer's agent to navigate the process of finding, negotiating, and closing on a home.
-
Mortgage Terminology:
- Explains various mortgage terms to make them easier to understand for readers.
-
Home Price and Affordability:
- Advises considering average home prices and determining how much house one can afford.
-
Down Payment:
- Defines the initial cash payment, usually represented as a percentage of the total purchase price.
-
Mortgage Types:
- Explains 15-Year Fixed-Rate Mortgage, 30-Year Fixed-Rate Mortgage, and 5/1 Adjustable-Rate Mortgage (ARM).
-
Interest Rate:
- Describes the ongoing cost of financing a home purchase, expressed as an annual percentage.
-
Private Mortgage Insurance (PMI):
- Calculated as a percentage of the original loan amount, required if the down payment is less than 20%.
-
Homeowner’s Insurance:
- Explains the requirement and coverage of homeowner's insurance.
-
Homeowner’s Association (HOA) Fees:
- Describes fees due for being part of a homeowner's association and the legal power they hold.
-
Monthly Payment:
- Stresses the importance of keeping the mortgage payment to 25% or less of monthly take-home pay.
-
Property Taxes:
- Taxes based on the government's appraisal of the property, usually included in the monthly mortgage payment.
-
Mortgage Calculator Uses:
- Highlights the uses of an online mortgage calculator, including predicting monthly payments and understanding interest payments.
-
Understand Your Mortgage Payment:
- Breaks down the components of a monthly mortgage payment, including principal, interest, homeowner's insurance, property taxes, and PMI.
-
Compare Different Mortgage Types:
- Recommends using a mortgage calculator to compare costs of different loan types, such as a 15-year vs. 30-year mortgage.
-
Calculate Your Down Payment:
- Advises using the mortgage calculator to estimate the impact of different down payment amounts on monthly payments.
In summary, the article covers a comprehensive range of topics related to mortgages, providing valuable insights and guidance for individuals navigating the home buying process.
