Question 1

What is PITI and what does it include?

Accepted Answer

PITI stands for Principal, Interest, Taxes, and Insurance — the four components of a complete monthly mortgage payment. Principal reduces your loan balance. Interest is the lender's charge for borrowing. Taxes are your property tax, collected monthly and held in escrow. Insurance covers both homeowner's insurance and, if applicable, PMI (Private Mortgage Insurance). NestCalcs calculates all four components so you see your true monthly cost.

Question 2

How much down payment do I need to avoid PMI?

Accepted Answer

For conventional loans, you need at least 20% down to avoid Private Mortgage Insurance (PMI). With less than 20% down, PMI typically costs 0.5%–1.5% of the loan amount per year. FHA loans require mortgage insurance regardless of down payment. VA loans have no PMI at all. Jumbo loans vary by lender but often require 20%+ down.

Question 3

What is the difference between a conventional loan and an FHA loan?

Accepted Answer

Conventional loans are not government-backed and typically require a 620+ credit score and 3–20% down. FHA loans are backed by the Federal Housing Administration, accept credit scores as low as 580, and require just 3.5% down — but they charge an upfront MIP fee (1.75% of the loan) plus an annual MIP that lasts the life of the loan in most cases. FHA can be better for buyers with lower credit or smaller down payments; conventional is usually cheaper for buyers with good credit and 20% down.

Question 4

What credit score do I need to get the best mortgage rate?

Accepted Answer

A credit score of 760 or above typically qualifies you for the best available mortgage rates under Fannie Mae's loan-level price adjustment (LLPA) grid. Scores between 740–759 are nearly as good. Rates increase at 720, 700, 680, and below. Going from a 680 to a 760 can lower your rate by 1.25% or more, saving tens of thousands over the life of the loan. You can explore how your credit score affects your rate using the 'What Rate Can I Expect?' section in NestCalcs.

Question 5

What is a good debt-to-income ratio for a mortgage?

Accepted Answer

Most lenders prefer a front-end DTI (housing costs / gross income) of 28% or less, and a back-end DTI (all debt payments / gross income) of 36% or less — known as the 28/36 rule. FHA loans allow up to 43% back-end DTI, and some lenders will go higher with compensating factors. VA loans have no hard DTI cap but use 41% as a guideline. The Income Qualifier section in NestCalcs shows you exactly how much income you need based on the 28/36 rule.

Question 6

Should I choose a 15-year or 30-year mortgage?

Accepted Answer

A 15-year mortgage has higher monthly payments but a significantly lower interest rate (typically 0.5–0.75% less than a 30-year) and you pay dramatically less total interest. A 30-year mortgage has lower monthly payments, giving you more flexibility and cash flow. The right answer depends on your financial situation: if you can comfortably afford the 15-year payment and have an emergency fund, the long-term savings are substantial. If cash flow is tight, a 30-year with voluntary extra payments can give you the best of both worlds.

Question 7

What are closing costs and how much should I budget?

Accepted Answer

Closing costs are fees paid at the time of purchase, typically 2%–5% of the loan amount. They include lender origination fees, appraisal, title insurance, attorney fees, prepaid property taxes and insurance, and government recording fees. On a $400,000 home with a $320,000 loan, expect $6,400–$16,000 in closing costs. Some costs are negotiable and you can sometimes roll them into the loan or ask the seller to cover them. NestCalcs estimates your closing costs in the Closing Cost Estimator section.

Question 8

When does refinancing make sense?

Accepted Answer

Refinancing generally makes sense when you can lower your rate by at least 0.5%, you plan to stay in the home long enough to recoup closing costs (the break-even point), and the monthly savings justify the upfront cost. A common rule of thumb: divide refinancing costs by monthly savings to find your break-even in months. If you plan to stay longer than the break-even, refinancing is likely worth it. NestCalcs has a full Refinance Analyzer that calculates your exact break-even point and net savings.

Question 9

What is an ARM loan and who is it good for?

Accepted Answer

An adjustable-rate mortgage (ARM) starts with a fixed rate for an initial period (e.g., 5 years for a 5/1 ARM), then adjusts annually based on a market index. ARMs typically start 0.5–1% lower than 30-year fixed rates, which means lower initial payments. They make sense for buyers who are confident they'll sell or refinance before the fixed period ends. They carry more risk than fixed-rate loans if rates rise during the adjustable phase.

Question 10

How much does buying mortgage points lower my rate?

Accepted Answer

One mortgage point costs 1% of the loan amount and typically lowers your interest rate by about 0.25%. So on a $300,000 loan, one point costs $3,000 and might drop your rate from 7.00% to 6.75%. Whether buying points makes sense depends on how long you keep the loan — you need to stay long enough for the monthly savings to exceed the upfront cost. NestCalcs includes a Mortgage Points Analyzer that shows you the break-even timeline for each points scenario.

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Mortgage FAQs

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Your completemortgage picture.

Mortgage FAQs

All Calculators & Guides

Your complete
mortgage picture.