Mortgage Calculator

MORTGAGE PAYMENT FORMULA: The standard mortgage payment formula calculates Principal & Interest (P&I): M = P × [r(1+r)^n] / [(1+r)^n - 1] Where: • M = Monthly payment • P = Principal (loan amount) • r = Monthly interest rate (annual rate ÷ 12) • n = Total number of payments (years × 12) CALCULATION EXAMPLE: For a $300,000 loan at 6.5% for 30 years: • Monthly rate: 6.5% ÷ 12 = 0.5417% • Total payments: 30 × 12 = 360 • Monthly P&I: $1,896.20 WHAT'S INCLUDED IN TOTAL MONTHLY PAYMENT: • Principal & Interest (P&I): The loan payment itself • Property Taxes: ~1-2% of home value annually • Homeowner's Insurance: $100-$300/month typically • PMI (if <20% down): 0.5-1% of loan annually • HOA Fees (if applicable): Varies widely This is often called PITI (Principal, Interest, Taxes, Insurance).

MAJOR FACTORS AFFECTING YOUR RATE: 1. CREDIT SCORE (Most Important) • 760+: Best rates, ~0.25-0.5% lower than average • 700-759: Good rates • 680-699: Higher rates, ~0.25% above average • 620-679: Subprime rates, 0.5-1% higher • Below 620: May not qualify for conventional RATE DIFFERENCE BY CREDIT SCORE (example on $300K loan): • 760 score at 6.25%: $1,847/month • 680 score at 6.75%: $1,946/month • Difference: $99/month = $35,640 over 30 years 2. DOWN PAYMENT • 20%+ down: No PMI, better rates • 10-19% down: Slightly higher rates + PMI • 3-5% down: Highest rates + PMI 3. LOAN TYPE • Conventional: Standard rates • FHA: Slightly higher, but easier to qualify • VA/USDA: Often competitive rates 4. LOAN TERM • 15-year: Typically 0.25-0.75% lower than 30-year • 30-year: Higher rate, lower payment 5. PROPERTY TYPE • Primary residence: Best rates • Second home: 0.25-0.5% higher • Investment property: 0.5-0.75% higher 6. ECONOMIC CONDITIONS • Federal Reserve policy • Inflation rates • Bond market performance

CURRENT MORTGAGE RATE OVERVIEW: TYPICAL RATE RANGES: • 30-Year Fixed: 6.50-7.00% • 15-Year Fixed: 5.75-6.25% • 5/1 ARM: 5.50-6.00% • FHA 30-Year: 6.25-6.75% • VA 30-Year: 6.00-6.50% FACTORS AFFECTING YOUR RATE: • Credit score (760+ gets best rates) • Down payment amount • Loan type and term • Property type and location • Current market conditions HOW RATE CHANGES AFFECT PAYMENTS: $400,000 home with 20% down ($320,000 loan): • At 7.00%: $2,129/month P&I • At 6.50%: $2,022/month P&I • At 6.00%: $1,919/month P&I • Each 0.5% rate drop saves ~$107/month = $38,520 over 30 years HISTORICAL PERSPECTIVE: • All-Time Low: 2.65% (2020) • Historical 50-year Average: ~7.75% • Rates fluctuate based on Federal Reserve policy and economic conditions Source: Freddie Mac Primary Mortgage Market Survey, Federal Reserve Economic Data

EXTRA PAYMENT ANALYSIS: YES, EXTRA PAYMENTS ARE WORTH IT WHEN: ✓ Your mortgage rate exceeds safe investment returns (6%+ currently) ✓ You have no high-interest debt (credit cards, personal loans) ✓ Your emergency fund is fully funded (3-6 months expenses) ✓ You're maximizing employer 401(k) match ✓ You plan to stay in the home long-term REAL SAVINGS EXAMPLE: $300,000 loan at 6.5% for 30 years, standard payment $1,896: Extra $100/month: • Payoff: 25 years, 1 month (saves 4 years, 11 months) • Interest saved: $51,847 • Total saved: $51,847 + $11,718 (extra payments not made) = $63,565 Extra $200/month: • Payoff: 21 years, 10 months (saves 8 years, 2 months) • Interest saved: $88,134 • Return on investment: Over 200% lifetime Extra $500/month: • Payoff: 16 years, 4 months (saves 13 years, 8 months) • Interest saved: $143,521 CONSIDER ALTERNATIVES FIRST: • Pay off credit cards (15-25% interest) before extra mortgage payments • Max out tax-advantaged retirement accounts • Build 6-month emergency fund • If mortgage rate < 4%, investing may yield higher returns STRATEGY COMPARISON: Investing $200/month at 7% return vs. paying down 6.5% mortgage: • After 30 years investing: ~$244,000 • Mortgage payoff savings: ~$88,000 • Difference: ~$156,000 favoring investment BUT mortgage payoff provides: • Guaranteed 6.5% "return" • Psychological peace of mind • Lower monthly obligations • Risk reduction

15-YEAR VS 30-YEAR COMPARISON: $400,000 home, 20% down ($320,000 loan): 30-YEAR MORTGAGE (6.5% rate): • Monthly payment: $2,022 • Total interest: $407,858 • Total paid: $727,858 15-YEAR MORTGAGE (5.75% rate): • Monthly payment: $2,664 • Total interest: $159,508 • Total paid: $479,508 DIFFERENCE: • Monthly: $642 higher for 15-year • Total interest savings: $248,350 • Build equity: 2× faster CHOOSE 15-YEAR IF: ✓ You can comfortably afford the higher payment ✓ Payment is less than 25% of gross income ✓ You have job stability ✓ You want to be debt-free sooner ✓ You're over 45 and want to retire mortgage-free ✓ Interest rate difference is significant (0.5%+) CHOOSE 30-YEAR IF: ✓ You need lower required payments for cash flow ✓ You're investing the difference aggressively ✓ Your income is variable ✓ You may sell within 7-10 years ✓ You want flexibility to pay extra when possible HYBRID STRATEGY: Get 30-year mortgage, pay like 15-year: • Required payment: $2,022 • Pay: $2,664 (15-year equivalent) • Benefits: Safety net if income drops + same payoff speed • Downside: Slightly higher interest rate

PRIVATE MORTGAGE INSURANCE (PMI) EXPLAINED: WHAT IS PMI? PMI protects the LENDER (not you) if you default on your mortgage. Required when down payment is less than 20%. TYPICAL PMI COSTS: • 0.5% to 1.5% of loan amount annually • $320,000 loan × 0.8% = $2,560/year = $213/month PMI COST BY CREDIT SCORE (on $320,000 loan): • 760+ credit: ~$160/month • 700-759: ~$200/month • 680-699: ~$240/month • Below 680: ~$300+/month HOW TO AVOID PMI: 1. PUT 20% DOWN • Most straightforward method • $400,000 home = $80,000 down payment 2. LENDER-PAID PMI (LPMI) • Higher interest rate instead of monthly PMI • Good if you'll sell/refinance within 5-7 years • Rate increase: typically 0.25-0.5% 3. PIGGYBACK LOAN (80-10-10) • 80% first mortgage + 10% second mortgage + 10% down • Second mortgage rate is higher (~8-10%) • Total may be less than PMI 4. VA LOAN (Veterans) • No PMI regardless of down payment • Funding fee instead (2.15-3.3% one-time) 5. PHYSICIAN/PROFESSIONAL LOANS • No PMI with 0-10% down • For doctors, dentists, lawyers, etc. HOW TO REMOVE PMI: • Automatic removal at 78% LTV (by original amortization) • Request removal at 80% LTV • Refinance when you have 20% equity • Get new appraisal if home value increased significantly EXAMPLE PMI REMOVAL: $400,000 home, $360,000 loan (10% down): • PMI removed at $320,000 balance (80% of $400,000) • Takes ~7 years with standard payments • Total PMI paid: ~$17,000

CLOSING COSTS BREAKDOWN: TYPICAL RANGE: 2-5% of loan amount $320,000 loan = $6,400 to $16,000 in closing costs ITEMIZED CLOSING COSTS: LENDER FEES: • Loan origination fee: 0.5-1% ($1,600-$3,200) • Application fee: $300-$500 • Underwriting fee: $400-$900 • Credit report: $30-$50 • Flood certification: $20-$50 THIRD-PARTY FEES: • Appraisal: $450-$750 • Home inspection: $300-$500 • Survey: $350-$600 • Title search: $200-$400 • Title insurance: $1,000-$3,500 • Attorney fees: $500-$1,500 PREPAID ITEMS: • Property taxes (2-6 months): $1,000-$5,000 • Homeowner's insurance (1 year): $1,200-$3,000 • Prepaid interest: Varies by closing date • HOA fees (if applicable): First month EXAMPLE CLOSING COSTS: $400,000 home, $320,000 loan: • Lender fees: ~$3,500 • Third-party fees: ~$4,000 • Prepaid items: ~$5,000 • TOTAL: ~$12,500 (3.9% of loan) HOW TO REDUCE CLOSING COSTS: 1. Shop multiple lenders (can save $2,000+) 2. Negotiate seller credits (up to 3-6% of price) 3. Close at end of month (less prepaid interest) 4. Compare title companies 5. Ask for lender credits (trade higher rate for lower costs) 6. Look for first-time buyer programs NO-CLOSING-COST MORTGAGES: • Lender pays costs in exchange for higher rate • Good if you'll refinance/sell within 5 years • Rate increase: typically 0.125-0.375%

BUY VS RENT ANALYSIS: FINANCIAL COMPARISON: $400,000 home with 20% down vs. $2,500/month rent BUYING MONTHLY COSTS: • Mortgage P&I (30yr, 6.5%): $2,022 • Property taxes: $500/month • Insurance: $150/month • Maintenance (1%/year): $333/month • PMI (if applicable): $0 • TOTAL: ~$3,005/month RENTING MONTHLY COSTS: • Rent: $2,500 • Renter's insurance: $25 • TOTAL: ~$2,525/month IMMEDIATE DIFFERENCE: Buying costs $480 more/month BUT CONSIDER OVER TIME: 5-YEAR ANALYSIS: Buying: • Equity built: ~$45,000 • Tax deductions: ~$12,000 saved • Appreciation (3%/year): ~$64,000 • TOTAL BENEFIT: ~$121,000 Renting: • Invested down payment at 7%: ~$112,000 • Saved monthly difference invested: ~$34,000 • TOTAL BENEFIT: ~$146,000 • WINNER: Renting (slightly) 10-YEAR ANALYSIS: Buying: • Equity built: ~$105,000 • Tax deductions: ~$20,000 • Appreciation (3%/year): ~$140,000 • TOTAL BENEFIT: ~$265,000 Renting: • Invested down payment at 7%: ~$157,000 • Saved monthly difference invested: ~$82,000 • TOTAL BENEFIT: ~$239,000 • WINNER: Buying BUY IF: ✓ Staying 5+ years in same location ✓ Have stable income and job security ✓ Can afford 10-20% down payment ✓ Want control over your living space ✓ Rent is close to mortgage cost RENT IF: ✓ May relocate within 3-5 years ✓ Need flexibility ✓ Can't afford down payment + closing costs ✓ Local market is significantly overpriced ✓ Want to invest aggressively instead

ADJUSTABLE-RATE MORTGAGE (ARM) EXPLAINED: HOW ARMs WORK: • Initial fixed-rate period (3, 5, 7, or 10 years) • Then rate adjusts annually based on index + margin • Rate caps limit how much it can change COMMON ARM TYPES: • 5/1 ARM: Fixed for 5 years, adjusts yearly after • 7/1 ARM: Fixed for 7 years, adjusts yearly after • 10/1 ARM: Fixed for 10 years, adjusts yearly after RATE STRUCTURE EXAMPLE (5/1 ARM): • Initial rate: 5.50% (vs 6.50% for 30-year fixed) • Index: SOFR (Secured Overnight Financing Rate) • Margin: 2.75% • Caps: 2/2/5 (first adjustment/subsequent/lifetime) If SOFR is 3.5% at first adjustment: New rate = 3.5% + 2.75% = 6.25% But capped at 5.50% + 2% = 7.50% MONTHLY PAYMENT COMPARISON ($320,000 loan): • 30-Year Fixed at 6.50%: $2,022/month • 5/1 ARM at 5.50%: $1,817/month • SAVINGS: $205/month for first 5 years = $12,300 BEST SCENARIOS FOR ARM: ✓ Plan to sell within the fixed period ✓ Expect to refinance before adjustment ✓ Anticipate rates falling ✓ Need lower initial payment to qualify ✓ Have income growth expected RISKS OF ARM: ✗ Rate shock when adjustment period begins ✗ Payment could increase significantly ✗ Harder to budget long-term ✗ May not be able to refinance when needed WORST-CASE SCENARIO: 5/1 ARM with 5/2/5 caps starting at 5.50%: • Year 6: Could be 10.50% • Payment on $300K remaining: $2,722 vs $1,817 (50% increase) RECOMMENDATION: Only consider ARM if: • You're 90%+ certain you'll move/refinance within fixed period • You have financial cushion for payment increases • Initial savings are substantial (0.75%+ rate difference)

AFFORDABILITY GUIDELINES: STANDARD RULES: • 28% Rule: Housing costs ≤ 28% of gross income • 36% Rule: Total debt ≤ 36% of gross income • Conservative: Housing costs ≤ 25% of take-home pay CALCULATION BY INCOME: $75,000/year ($6,250/month gross): • 28% limit: $1,750/month housing • Estimated home price: $250,000-$280,000 • Down payment needed (20%): $50,000-$56,000 $100,000/year ($8,333/month gross): • 28% limit: $2,333/month housing • Estimated home price: $350,000-$380,000 • Down payment needed (20%): $70,000-$76,000 $150,000/year ($12,500/month gross): • 28% limit: $3,500/month housing • Estimated home price: $500,000-$550,000 • Down payment needed (20%): $100,000-$110,000 $200,000/year ($16,667/month gross): • 28% limit: $4,667/month housing • Estimated home price: $700,000-$750,000 • Down payment needed (20%): $140,000-$150,000 WHAT LENDERS LOOK AT: 1. DTI (Debt-to-Income) Ratio: • Front-end DTI: Housing costs ÷ gross income (max 28-31%) • Back-end DTI: All debts ÷ gross income (max 36-43%) 2. Credit Score: • 620 minimum for conventional • 740+ for best rates 3. Down Payment: • 3% minimum conventional • 3.5% minimum FHA • 0% VA/USDA 4. Cash Reserves: • 2-6 months of payments in savings HIDDEN COSTS TO FACTOR: • Property taxes: 0.5-2.5% of home value • Insurance: $100-$300/month • Maintenance: 1-2% of home value annually • Utilities: $200-$500/month • HOA: $0-$800/month REALISTIC AFFORDABILITY EXAMPLE: $100,000 income, $380,000 home: • Mortgage P&I: $1,921 • Taxes: $380/month • Insurance: $150/month • Maintenance: $317/month • TOTAL: $2,768/month (33% of gross) • Consider aiming for $320,000-$340,000 for comfort

COMPREHENSIVE MORTGAGE TYPES GUIDE: 1. CONVENTIONAL MORTGAGES • Not government-backed • Current conforming limit: $806,500 (higher in expensive areas) • Down payment: 3-20%+ • Credit score: 620+ (700+ preferred) • PMI required under 20% down Best for: Good credit, adequate savings, flexibility 2. FHA LOANS (Federal Housing Administration) • Government-insured • Down payment: 3.5% (580+ credit) or 10% (500-579) • Credit score: 500 minimum • Mortgage Insurance Premium (MIP): 1.75% upfront + 0.85%/year • MIP for life of loan (unless 10%+ down) Best for: First-time buyers, lower credit scores 3. VA LOANS (Veterans Affairs) • For veterans, active duty, eligible spouses • Down payment: 0% • No PMI • Funding fee: 2.15-3.3% (can be financed) • Competitive rates • No prepayment penalty Best for: Eligible veterans and military members 4. USDA LOANS (Rural Development) • For rural/suburban areas • Income limits apply (115% of area median) • Down payment: 0% • Guarantee fee: 1% upfront + 0.35%/year • Must be primary residence Best for: Moderate income buyers in eligible areas 5. JUMBO LOANS • Exceeds current conforming limits ($806,500+) • Higher credit requirements (700-720+) • Larger down payment (10-20%+) • Stricter DTI requirements • Rates slightly higher than conforming Best for: Expensive properties, high-income buyers 6. FIXED-RATE MORTGAGES • Rate locked for entire term • Predictable payments • 15, 20, 25, 30-year terms • Higher initial rate than ARM Best for: Long-term homeowners, budget certainty 7. ADJUSTABLE-RATE MORTGAGES (ARM) • Lower initial rate • Adjusts after fixed period • 3/1, 5/1, 7/1, 10/1 options • Rate caps protect against extreme increases Best for: Short-term ownership, expects rate drops 8. INTEREST-ONLY MORTGAGES • Pay only interest for initial period (5-10 years) • Lower initial payments • No equity building initially • Payment jumps after interest-only period Best for: Investors, high-income with variable income 9. BRIDGE LOANS • Short-term (6-12 months) • For buying before selling current home • Higher rates (8-10%+) • Requires equity in current home Best for: Timing gap between homes

STRATEGIES TO GET THE LOWEST RATE: 1. IMPROVE YOUR CREDIT SCORE (Biggest Impact) Timeline: 3-12 months before applying Quick wins: • Pay down credit card balances below 30% • Don't open new accounts • Dispute any errors on credit reports • Become authorized user on old account Credit score impact on rates: • 740-759: Standard good rates • 760-779: Better rates (0.125% lower) • 780+: Best rates (0.25-0.375% lower) 2. SAVE FOR LARGER DOWN PAYMENT • 20% eliminates PMI (saves $150-300/month) • 25%+ may get slight rate discount • Shows lender you're lower risk 3. SHOP MULTIPLE LENDERS (Critical) Compare at least 3-5 lenders: • Big banks (Chase, Wells Fargo, Bank of America) • Credit unions (often 0.25-0.5% lower) • Online lenders (Rocket, Better, etc.) • Mortgage brokers (access multiple lenders) Potential savings: 0.25-0.75% rate difference = $10,000-$30,000 over loan life 4. CONSIDER DISCOUNT POINTS • 1 point = 1% of loan amount • Each point typically lowers rate by 0.25% • Break-even: 4-5 years typically Example: $320,000 loan • 1 point = $3,200 • Rate drops 6.5% to 6.25% • Monthly savings: $51 • Break-even: 63 months (5.25 years) 5. CHOOSE SHORTER TERM • 15-year typically 0.5-0.75% lower than 30-year • 20-year often 0.25% lower than 30-year 6. TIME YOUR LOCK • Rate locks typically 30-60 days • Lock when rates are favorable • Float-down option if rates drop (costs extra) • Watch Fed announcements and economic data 7. NEGOTIATE FEES What's negotiable: • Origination fee (can often be waived/reduced) • Processing fees • Underwriting fees • Application fees 8. CONSIDER RELATIONSHIP DISCOUNTS • Existing bank customers: 0.125-0.25% discount • Auto-pay setup: 0.25% discount common • Large deposits/investments: Additional discounts RATE SHOPPING TIMELINE: • 6-12 months: Improve credit, save for down payment • 3 months: Get pre-approved, compare lenders • 30-45 days before closing: Lock rate • At closing: Verify rate matches lock agreement Source: Consumer Financial Protection Bureau (CFPB), Freddie Mac