Mortgage Calculator

Loan Types Explained

Conventional Loans

The standard mortgage for borrowers with good credit (typically 620+, but best rates require 740+). Requires 3-20% down payment. If you put less than 20% down, you pay Private Mortgage Insurance (PMI) until you reach 78% loan-to-value. PMI rates vary by credit score. A borrower with 760+ credit pays roughly 0.19% annually, while someone at 680 pays around 0.56%.

FHA Loans

Government-backed loans designed for first-time buyers and those with lower credit scores (minimum 580 for 3.5% down, 500 for 10% down). FHA charges two types of mortgage insurance: an upfront premium of 1.75% of the loan amount (rolled into the loan), plus an annual premium of 0.50-0.55% for the life of the loan. Unlike conventional PMI, FHA mortgage insurance never drops off unless you refinance.

VA Loans

Available to active military, veterans, and surviving spouses. The best mortgage program in existence: zero down payment, no PMI, and competitive rates. The trade-off is a one-time VA funding fee (1.25-2.15% of the loan amount, depending on down payment and usage) that gets added to the loan balance.

Understanding PMI

PMI protects the lender if you default. It does nothing for you. The goal is to eliminate it as fast as possible. On conventional loans, PMI automatically drops when your loan balance reaches 78% of the original purchase price. You can also request removal at 80% by contacting your servicer.

PMI costs vary dramatically by credit score. On a $300,000 loan at 90% LTV, a borrower with 760+ credit pays about $83/month in PMI. A borrower with 680 credit pays about $140/month for the exact same loan. Improving your credit score before buying can save you thousands.

How Mortgage Amortization Works

In the early years of a 30-year mortgage, most of your payment goes toward interest, not principal. On a $300,000 loan at 7%, your first payment of $1,996 includes $1,750 in interest and only $246 in principal. By year 15, the split is roughly even. By year 25, most of the payment reduces your balance.

This is why extra payments early in the loan have an outsized impact. An extra $200/month in the first year saves far more interest than the same $200/month in year 20, because you are reducing the balance that interest compounds on.

Frequently Asked Questions

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