Gather the Necessary Loan Details
Before you open a mortgage calculator, collect the details you'll need. Most calculators ask for the home's purchase price, your down payment, the loan term, and the interest rate. Having these numbers ready helps you enter the information correctly and avoid guessing.
The home purchase price is the amount you plan to pay for your home. Your down payment is the percentage of the sale price you plan to pay up front. Knowing both figures is the first step to getting a meaningful estimate.
- Home purchase price: the full price you expect to pay.
- Down payment amount or percentage: what you'll pay upfront.
- Loan term: the length of the mortgage, such as 15 or 30 years.
- Interest rate: the annual cost of borrowing, expressed as a percentage.
- Optional: property tax, homeowners insurance, HOA fees, and PMI.
Sources: Fannie Mae
Entering the Loan Amount and Down Payment
Identify the home purchase price in the purchase price field. Then enter your down payment amount or percentage. The calculator will use these two figures to determine the loan amount you need to borrow.
Sources: Fannie Mae
Set the Interest Rate and Loan Term
The interest rate is the cost to borrow money, expressed as a percentage of the principal amount. Your loan term is the repayment period—commonly 15 or 30 years. A longer term typically results in a lower monthly principal payment, but you pay more interest over the life of the loan.
Identify the annual interest rate you have been quoted. If you're comparing offers, you can follow this practical guide multiple times with different rates to see how they change your payment.
Sources: Fannie Mae
Including property taxes, insurance,
Property taxes are yearly taxes determined by your local government, usually a percentage of the home's value. Homeowners insurance covers certain types of damage to your home, and rates depend on factors like home size, age, location, and deductible. Many mortgage calculators include these amounts in your monthly payment estimate.
- Get a homeowners insurance quote from an insurer—amounts vary widely.
- Many calculators have an Advanced View where you can enter these amounts manually.
Sources: Fannie Mae
Adjusting Advanced Options
Many mortgage calculators include an Advanced View that lets you adjust amounts for homeowners insurance, HOA/condo fees, and property taxes. HOA or condo fees are monthly fees for services like landscaping, exterior maintenance, water, and sewer, if you buy a condo or a home with an HOA.
Review each input to make sure it reflects your actual situation. For example, if you have a large down payment, you might not need PMI. If your homeowners insurance estimate is rough, you can adjust it later.
Sources: Fannie Mae
Check the Results for Accuracy
After entering all the numbers, review the calculator's output. Your monthly mortgage payment will usually include principal, interest, and any escrowed property taxes and insurance. Check that the loan amount, rate, and term you entered match your intended mortgage.
Remember that PMI can be removed once you pay down your loan balance to below 80% of the home's purchase price or achieve 20% equity. So your early payments may include PMI, but it won't be permanent.
Sources: Fannie Mae
Frequently asked questions
What is the difference between principal and interest rate?
Principal is the amount you borrow to buy the home—the loan amount. The interest rate is the cost to borrow that money, expressed as a percentage of the principal. Your monthly payment typically includes both principal and interest, along with any escrowed taxes and insurance.
Sources: Fannie MaeShould I include HOA fees in my calculation?
Yes, if the home has a homeowners association (HOA) or is a condo, include those monthly fees. HOA/condo fees cover services like landscaping, exterior maintenance, water, and sewer. They add to your monthly housing costs, so including them gives a more accurate total payment.
Sources: Fannie MaeHow do I understand how to calculate PMI?
PMI is typically required if your down payment is less than 20%. It's calculated as a percentage of your loan amount, usually ranging from 0.2% to 2% annually. The exact percentage depends on your down payment, credit score, loan amount, and loan type. To estimate, multiply your loan amount by the annual PMI rate and divide by 12 to get the monthly cost.
Sources: Fannie MaeSources
- Mortgage calculator | Fannie Mae — Fannie Mae
- Homebuyer Frequently Asked Questions | Fannie Mae — Fannie Mae