What is the 28/36 rule for mortgage affordability?+
The 28/36 rule states: your monthly mortgage payment should not exceed 28% of your gross monthly income, and your total monthly debt payments should not exceed 36%. For example, if you earn $10,000/month, your mortgage should be no more than $2,800. This rule helps ensure you have enough income for living expenses and savings.
What is the difference between 15-year and 30-year mortgages?+
A 30-year mortgage has lower monthly payments but costs more in total interest. A 15-year mortgage has higher payments but saves substantial interest. For a $300,000 loan at 7%: 30-year costs $1,996/month with $418,348 total; 15-year costs $2,997/month with $239,532 total. Choose based on your budget and financial goals.
How much down payment do I need for a mortgage?+
Conventional mortgages typically require 3-20% down. FHA loans allow as little as 3.5% down. VA and USDA loans may allow 0% down for eligible borrowers. A larger down payment reduces your loan amount, monthly payment, and mortgage insurance costs. However, ensure you maintain emergency savings even after a large down payment.
What is mortgage insurance and when do I need it?+
Private Mortgage Insurance (PMI) is required when you put down less than 20%. PMI protects the lender if you default and costs 0.5-1% of the loan amount annually. PMI can be removed once you build 20% equity in your home. This is why a larger down payment saves money over time.
How does interest rate affect my mortgage payment?+
Interest rate has a massive impact on total cost. A $300,000 30-year mortgage costs $1,996/month at 7% but only $1,262/month at 4%. Over 30 years, the 7% rate costs $240,000 more in interest. Shopping for the best rate matters—even 0.5% difference saves tens of thousands.