Buying a house is complicated -- and trying to calculate how much you can afford each month can be tricky. CNET's mortgage calculator can help you figure out how all of the component costs -- principal, interest, taxes and insurance (often referred to as PITI) -- roll up to a monthly mortgage payment.
Note that this calculator excludes expenses like private mortgage insurance, a down payment, closing costs and attorney fees. We do offer some guidelines for estimating those below, though. It's also worth acknowledging that this calculator can only provide an estimate: Your specific payment will depend on your specific situation, including your property, state of residence and the lender's particular terms and conditions.
How our mortgage calculator works
Want to estimate how much you'll pay each month for your mortgage? This calculator uses the standard mortgage equation to determine your estimated monthly payment.
M = P [ r (1 + r)^n ] / [ (1 + r)^n - 1]
- M = your monthly mortgage payment
- P = your principal loan amount
- r = your monthly interest rate. Most lenders list this as an annual figure, so you'll need to divide this number by 12 to calculate your monthly rate. For example, if your rate is 4%, your monthly rate would be 0.003333 (0.04/12=0.003333).
- n = the number of monthly payments you'll make over the lifetime of the home loan. To find this, multiply the number of years in your loan term by 12 (the number of months in one year) and you'll get your total number of payments. A standard 30-year fixed mortgage, for example, would have 360 payments (30 x 12 = 360).
Other expenses that could impact your monthly payment
In addition to the principal and interest, there are other upfront and monthly costs to consider as part of the homebuying process:
- Down payment: Depending on your home loan type, a typical down payment is usually 20% -- though some types of loans will let you put down less -- and even, in some cases, nothing.
- Closing costs: When you close on your new home, your closing cost may range from 3% to 6% of the total mortgage amount. These costs include:
- Origination fees. These costs are charged by the lender for "originating," or creating your loan. Other costs in this category include application fees, underwriting fees, processing fees and administrative fees.
- Points. If you decide to pay for points, you'll pay more upfront in exchange for a lower monthly payment. One point equals 1% of the loan amount.
- Taxes and government fees. These are charged by your local government.
- Prepaid expenses and deposits. You'll typically be required to make an upfront deposit into an escrow for your property taxes and homeowners insurance.
- Mortgage Insurance: Depending on your loan type and down payment amount, you may be required to purchase mortgage insurance, which typically includes an upfront payment.
- Property taxes and homeowners insurance. In addition to an upfront deposit, you'll also be required to make monthly payments for property taxes and homeowners insurance, typically bundled into your mortgage amount.
Next steps in the home-buying process
Once you know how much home you can afford, you can start the mortgage preapproval process and begin your home search. Your lender will use more detailed information than our calculator, so your actual affordability may look a bit different. And don't forget to shop around to ensure you're getting the best rates available.
Home buyers' glossary
When you're new to home buying, some of the terms may be unfamiliar. We've compiled some of the standard terms associated with home buying to help you understand the process.
- APR: Your annual percentage rate is the combination of your interest rate and any lender fees.
- Credit score: Your credit score rates your creditworthiness by telling lenders how likely you are to pay back your loan. In general, the higher your credit score, the lower your interest rate.
- DTI ratio: Your debt-to-income ratio is your monthly debt payments divided by your monthly income. It shows lenders what percent of your income goes to debt each month. The highest DTI you can have for a mortgage is 43%, though most lenders prefer a DTI of 36% or less.
- Down payment: Your down payment is the amount of money you pay upfront for your home, listed as a percentage of the purchase price. Most lenders require at least 3% to 5% down, though a down payment of at least 20% will result in no private mortgage insurance.
- Homeowners insurance: Homeowners insurance is a type of insurance to compensate you for your losses in case your home is damaged or destroyed. Most mortgage lenders require that borrowers have homeowners insurance.
- Income: For purposes of qualifying for a mortgage, lenders typically use your gross income, meaning your pay before any taxes or other deductions.
- Mortgage term: Your mortgage term is the number of years of your mortgage. Most mortgages have a 30-year term, but you can also get a 15- or 20-year term.
- PITI: PITI stands for principal, interest, taxes and insurance, the four components of your monthly housing expense.
- Property taxes: Property taxes are paid to your local government. The amount you'll pay depends on the value of your home and the property tax rate in your area.
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October 25, 2021 at 06:00PM
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