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  3. Mortgage Calculator

mortgage calculator

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How to use Credit Karma’s mortgage calculator

Our mortgage calculator can help you get a sense of what your monthly payment could be when buying a home. This can be a great way to see whether you may be able to afford the home you’re considering and how your new mortgage could fit into your monthly budget.

But keep in mind that the result you get may not reflect your actual total costs. There may be additional taxes or fees that apply that aren’t in the calculator. Talk to your loan officer to get a sense of what these might be. The more information you put into the calculator, the more accurate your estimate could be.

Here’s some of the info you’ll need to supply to best estimate your monthly loan payment.

Cost of the home

This is the sale price of the home you’re buying. If you’re still shopping, you can put in a ballpark estimate here. You can also choose to input the list prices of different homes you’re considering.

Down payment

Enter the down payment you can afford to make on the home — either a percentage or a dollar amount. Different types of loans require different down payment amounts. For example, you may be able to get a conventional loan with a lower down payment — some lenders allow down payments as low as 3% for qualified buyers. An FHA loan allows you to make a down payment as low as 3.5% if you qualify. Making a larger down payment may help lower your interest rate.

Loan amount

Your loan amount will generally be the cost of the home minus your down payment. This is the principal amount you’re borrowing plus the dollar figure you’ll pay back with interest.

Private mortgage insurance

If you’re planning to use a conventional loan, you’ll likely need to pay for private mortgage insurance, or PMI, if you make a down payment that’s less than 20%. PMI protects the lender in case you don’t make your mortgage payments. Your loan officer can help you get an estimate of what this annual cost will be.

Estimated interest rate

Your interest rate is the cost of borrowing money, expressed as a percentage. The interest rate you’re offered will depend on a variety of factors, including your credit score, down payment, loan term and loan type. Higher credit scores and down payments often mean lower interest rates — and therefore lower costs over the course of the loan.

Life of the loan

This is your loan term in years, or how long it will take to pay off your loan. Traditional mortgages often have 30-year loan terms, but you can also choose to take out a 15-year or 10-year mortgage — or another loan term, if your lender offers one. Shorter loan terms usually mean lower interest rates, but your monthly payment will be higher.

Property taxes

Property taxes are charged by your local or state government. Usually, the property taxes you pay are based on the value of your property. Mortgage lenders may require you to pay each month toward your annual property taxes as part of your escrow payment.

Homeowners insurance

Homeowners insurance protects you in case of damage to your home from something like a burglary or fire. Lenders typically require you to show proof of homeowners insurance, and you may pay for this through your escrow account just like property taxes.

HOA fees

If you buy a home in a subdivision or a condo in a community, you may need to pay dues to a homeowners association. These fees pay for amenities and services the community offers, and they can vary widely. Usually you will pay these fees separately from your escrow account.

What mortgage payment can I afford?

To decide what size mortgage you can afford, start by looking at your monthly budget. As a general rule, your mortgage payment shouldn’t be more than 35% of your gross income, or the total amount you earn. If your family earns $75,000 per year, that means your monthly mortgage payment should be no more than $1,750 to $2,187.50

Use our calculator to figure out what loan amount creates a monthly payment in that ballpark. But don’t forget, as you decide what payment fits comfortably into your budget, you’ll also want to take into account other costs associated with homeownership. These include things like monthly utility bills along with maintenance and repairs.

Having a significant amount of other debt, like student loans or car loans, can complicate things. Lenders look at what’s called your debt-to-income ratio, or the total amount of monthly debt payments you must make compared with the amount you earn. In most cases, this should be no more than 43% for best results. Say you earn $75,000 per year and have a monthly student loan payment of $800 and car loan payment of $500. With a potential mortgage payment of $2,000, that would put your debt-to-income ratio at 53%.

You can also choose to find out what you prequalify for from various lenders. You can fill out online applications at several different lenders to see what they will offer you. Keep in mind, though, that just because a lender is willing to let you borrow a certain amount doesn’t mean it’s a good fit for your finances.

What is a loan amortization schedule?

A loan amortization schedule shows how your monthly payment pays off your mortgage over time. At the beginning of your mortgage, a significant part of your payment typically goes toward interest. As you make more payments, gradually more of those payments begin to go toward principal. This means that at the beginning of your mortgage, you’re not paying down your balance as quickly — or building as much equity.

That’s why some homeowners choose to make additional payments, which can go directly to the principal of the loan. But make sure to check with your lender before doing so to see if there are any additional fees involved. Making additional payments helps you pay off your mortgage and build equity more quickly.

You can use Credit Karma’s loan amortization calculator to get a sense of how your monthly payment breaks down over time.

How can I prepare to buy a home?

Using a mortgage calculator is a good start if you’re preparing for buying a home. As you shop home listings, you may also consider a few of these steps.

  • Check your credit. Your credit scores play a major role in qualifying for a mortgage. Some loan programs have minimum credit scores, and the better your credit scores, the better an interest rate you’re likely to receive. The best rates go to people with scores in the mid-700s or above. People with a score in the low 600s or below may have fewer options — or more expensive ones.
  • Determine your down payment. Look at the total amount you’ve saved in all of your financial accounts and set aside the money you’ll need for moving costs, renovations and other expenses. Leave yourself an emergency savings cushion as well.
  • Consider if it’s the right time to buy. Look at home prices in the area where you’d like to live and see if the homes fit into your budget.
  • Gather your documents. When you apply for a loan, mortgage companies will ask for a trove of financial documents to gauge your ability to repay a loan. Start gathering up things like your W-2 tax forms, bank account statements, pay stubs and tax returns.