Buying your first home is exciting, but understanding the financial side can be overwhelming. This guide breaks down mortgage calculations so you can make confident decisions.

How Mortgage Payments Work

Your monthly mortgage payment typically includes four components (known as PITI):

Principal — The amount going toward paying off your loan balance
Interest — The cost of borrowing money
Taxes — Property taxes (often escrowed)
Insurance — Homeowner’s insurance and possibly PMI

Understanding Down Payments

Down Payment	Impact
20% or more	No PMI required, lower monthly payments
10-19%	PMI required, moderate monthly payments
3-5%	Higher PMI, higher monthly payments
0% (VA/USDA)	Only for eligible borrowers

PMI (Private Mortgage Insurance) typically costs 0.5% to 1.5% of the loan amount annually and is required when your down payment is less than 20%.

The Impact of Interest Rates

Even a small rate difference has a huge impact over 30 years:

Rate	Monthly Payment (on $300K)	Total Interest
5.0%	$1,610	$279,767
6.0%	$1,799	$347,515
7.0%	$1,996	$418,523

A 1% rate increase costs over $60,000 in additional interest!

15-Year vs 30-Year Mortgage

30-year: Lower monthly payments, more total interest paid
15-year: Higher monthly payments, significantly less total interest, builds equity faster

Tips for First-Time Buyers

Get pre-approved before house hunting
Budget for all homeownership costs (not just the mortgage)
Don’t max out your budget — leave room for emergencies
Improve your credit score before applying
Compare offers from multiple lenders

Calculate Your Mortgage

Use our free Mortgage Calculator to estimate your monthly payments, see how different down payments affect your costs, and plan your home purchase with confidence.