Are you ready to start home shopping? A mortgage calculator can help you understand how much your monthly payment may be, which means you can experiment with different purchase prices to nail down your budget. The tool provides a monthly payment estimate based on your loan amount, interest rate, property taxes, and more.
Using a mortgage calculator gives you a clearer financial picture before you start touring homes. That way, you can narrow down your search and avoid wasting time by looking at properties that don't suit your budget.
However, home prices and property taxes can vary widely by location. Therefore, you need to run the numbers carefully. Always be conservative with your interest rate estimates, rather than assuming you'll get the best rates. Below, we'll walk through how to use the mortgage calculator and what you should know before applying for a home loan.
How to use the mortgage calculator
Our mortgage calculator is built to be user-friendly. Here's how to get the most accurate estimate:
- Enter the home price: Start with the purchase price of the property you're considering, or a ballpark price if you haven't found a home yet
- Add your down payment: Input either a percentage or a dollar amount
- Choose your loan term: A 30-year term is the default, but you can choose a 15-year mortgage if you want to compare your options
- Input your interest rate: Put in the current market rate for the type of loan you want to apply for
- Factor in property taxes and insurance: These vary by city and county, so it's important to do your research for accurate estimates
Once you enter these details, the mortgage calculator will estimate your monthly principal and interest payment. You'll also see how much you'll pay per month once taxes and insurance are added in.
If you haven't found a specific home yet, experiment with different down payment amounts and purchase prices to figure out what fits your budget.
What is a mortgage?
A mortgage is a loan used to purchase real estate. The property acts as collateral, which means the lender can take possession of it if you default on the loan. When you take out a mortgage, you agree to pay the following:
- The principal (amount borrowed)
- Interest (cost of borrowing)
- Property taxes
- Homeowners insurance
- Private mortgage insurance (required if you put less than 20% down)
Your monthly payment is the sum of these elements. A mortgage calculator helps you break down these components so you can see how each one impacts your total monthly cost.
Mortgages: What you need to know
Home prices vary significantly depending on where you choose to buy. Competitive metro areas and coastal markets tend to have much higher median home prices than rural regions or smaller inland communities. Once you decide where you want to live, start researching specific neighborhoods. Be realistic about the median home prices in those areas and use the mortgage calculator to compare your options.
Property taxes are another factor that you need to account for. They can increase annually, which impacts your mortgage, even if you have a fixed interest rate. Tax rates vary considerably from state to state and even from county to county, so it's worth looking up the specific rates for any area you are seriously considering.
Depending on where you buy, you may also need additional insurance coverage for local risks such as floods, earthquakes, wildfires, or hurricanes. While that coverage protects you and your investment, it also adds to your monthly bill.
Terminology defined
Buying a home and taking on a mortgage can feel daunting, and the terminology is a big reason why. Here are some terms you should learn to help make the process less mysterious:
- Principal: The amount you borrow
- Interest rate: The percentage the lender charges you for borrowing money
- Annual percentage rate (APR): A measure of the total loan cost that includes fees in addition to interest
- Escrow: An account where your lender collects property taxes and insurance payments as part of your monthly mortgage bill
- Private mortgage insurance: PMI is required on many conventional and FHA loans if you put down less than 20%
- Debt-to-income ratio (DTI): The percentage of your monthly income that goes toward debt payments
If you have questions or concerns about what any of these terms mean, ask your lender. They can further explain how they impact your home-buying process so you can make an informed decision.
How your credit score impacts your mortgage
When reviewing your application, lenders will conduct a hard credit inquiry and review both your credit report and score. The higher your score, the better your odds of being approved for a competitive interest rate. If your score is too low, you may not qualify for a home loan at all. There are minimum score requirements for each type of mortgage, ranging from 580 to 640 or higher.
Use Kikoff to improve your mortgage approval odds
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Take a step toward stronger credit habits with Kikoff.
Frequently asked questions
How accurate is a mortgage calculator?
A mortgage calculator can give you a good baseline for estimating your monthly payment based on the cost of the home, the interest rate, and how much you put down. If you provide accurate information, such as an appropriate interest rate and home purchase price, the calculator's estimate will be more reliable.
Does the mortgage calculator include property taxes?
Yes, a mortgage calculator typically includes property taxes. However, the tax estimate may not account for local fees, which means that your actual property taxes can vary depending on where you buy.
What credit score do I need for a mortgage?
The credit score you need depends on what type of loan you are applying for. The minimum score requirements for an FHA loan are 580 with 3.5% down, 620 for a conventional or VA loan, and 620–640 for a USDA loan.
