First Time Home Buyer Mortgage Calculator 2022

Written by Elizabeth BoydSeptember 8th, 20225 minute read

Jump to section: First-time home buyer mortgage calculator | How much house can I afford? | How to lower mortgage payments | FAQ

Our first-time home buyer mortgage calculator can help you estimate your down payment and monthly mortgage payment, including taxes and insurance. This can give you a better idea of how much you need to save and how much house you can afford as a first-time buyer.

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First-time home buyer mortgage calculator

How much house can I afford?

Finance experts often use the 28/36 rule: you shouldn't pay more than 28% of your gross monthly income into your mortgage. Total debt shouldn't exceed 36% of your gross monthly income.

The cost of your mortgage depends on many factors, like the interest rate, mortgage term, and how large your down payment is.

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Interest rate

The interest rate is the annual percentage your lender charges you to borrow money. That percentage is calculated against the principal loan amount. It determines the amount of interest you’ll pay over the life of your loan. It also affects your monthly mortgage payment. The lower the rate, the lower your monthly PI (principal and interest) payment. Lower interest rates can help you qualify for a higher-priced home.

Mortgage term

Your mortgage term is the length of time scheduled to repay the loan with interest. The most common are 15-year and 30-year terms. But you and your lender may negotiate other terms that work for you, like 10, 12, and 20 years. Typically, the longer the term, the lower the monthly mortgage payments, but that means you’ll pay more interest over the life of your loan.

Down payment percentage

The down payment percentage is calculated against the total home purchase price. What’s left is the amount you’ll need to borrow to buy the home. Therefore, the bigger the percentage you put down, the smaller your loan amount. The smaller the loan amount, the lower your monthly mortgage payment (and the lower the interest).

Down payment percentage
Loan Percentage Calculation
Resulting Loan Amount
Monthly Principal & Interest Payment
$300,000 x 0.97
$300,000 x 0.965
$300,000 x 0.95
$300,000 x 0.90
$300,000 x 0.85
$300,000 x 0.80
$300,000 purchase price with a 5.5% interest rate on a 30-year fixed-rate mortgage

Annual real estate taxes

You'll owe more in counties or states with high tax rates and properties with higher valuations. That extra cost can impact whether you can afford the mortgage payment on the house you want.

Annual property taxes vary based on location, tax rates, home and land value, assessment method, and frequency. Your mortgage company wants to ensure you pay your property taxes yearly to avoid tax liens. So they'll add 12-month prorated taxes to your mortgage payments. Then they hold the payments in an escrow account to pay the tax bill when it comes due.

Annual home insurance

Your mortgage company requires financial assurance that they won’t lose their investment if your house is destroyed. Lenders treat insurance premiums like tax payments, adding 12-month prorated premiums to your monthly payment and holding them in an escrow account.

How to lower your monthly mortgage payment

Choose a longer mortgage term

Opting for a 30-year term can get you into a house you couldn’t manage with a 15-year term.

Buy a less expensive home

The lower purchase price means reduced interest and a smaller mortgage payment. You also pay less in taxes and home insurance premiums. If you work with an experienced agent, they can help you negotiate a lower price for your dream home.

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Apply a larger down payment

You’ll lower the amount you need to borrow if you can afford to put more money down upfront. That reduces your mortgage payments and decreases the total amount of interest you’ll pay.

Avoid private mortgage insurance (PMI)

Most lenders and programs require PMI when your down payment is below 20%. You can avoid that added expense with a 20% down payment.

VA loans are the exception. There’s no PMI requirement, but you’ll need to pay a funding fee.

⚡ Quick tip: You can also avoid PMI with a piggyback loan on a conventional mortgage. But the additional loan payment may defeat the purpose. Do the calculations to determine the best approach.

First-time home buyer FAQ

You need at least 3.5% of the home purchase price as a down payment for an FHA loan. For example, you must put down at least $10,500 on a $300,000 house. But you must also have a FICO credit score of at least 580 to qualify for the 3.5% down payment option. Private mortgage insurance is also required.

Your mortgage payment usually includes principal, interest, escrow taxes, and homeowners insurance. It may also include private mortgage insurance (PMI) and monthly HOA fees.

Enter the purchase price, down payment, interest rate, and loan term into a mortgage calculator to calculate the principal and interest (PI).

Divide the annual costs of your escrow expenses (taxes, insurance, HOA) by twelve.

Add those additional monthly escrow amounts to the PI to compute the total monthly mortgage payment.

Only government-backed VA and USDA loans allow no-money-down purchases. In addition, each program has its own credit qualification guidelines.

VA (Veterans Administration) loans help qualified veterans, and eligible surviving spouses buy homes with no down payment. The VA sets no minimum credit score for borrowers. However, approved lenders must follow the VA guidelines. So, those lenders typically want to see a score of 620 or higher. Though a few may accept a borrower with a FICO score as low as 580.

Borrowers can also buy homes with no money down through the USDA (U.S. Department of Agriculture) home-purchasing program. The typical minimum credit score is 640. But some borrowers may qualify with a lower score (or no score) by submitting an acceptable bill payment history.

Keep in mind that lenders look at much more than your credit score when evaluating your mortgage application. They carefully review your credit report to determine how well you handle credit, pay bills, and manage debt. A stable income is also crucial.

First-time home buyers may qualify for various no-down-payment programs. You can also get help with closing costs. So it’s possible to buy your first home with no money down (no deposit at all). But that option is rare and difficult. You’ll likely need to pay some closing costs at a minimum.

Yes, a 10% deposit is a sufficient down payment to purchase your first home. But mortgage insurance will likely be necessary. Most lenders require PMI if the down payment is less than 20%. You should also budget for closing costs, which can run about 3-5% of the total purchase price. However, many mortgage programs require no- or low-down payments (0-3.5% down). So if you have 10% of the purchase price on hand, you may be able to pay closing costs and any required down payment with those funds.