1) What your monthly payment includes
Most people think “mortgage payment” means principal and interest (P&I). But many borrowers also pay taxes and insurance through escrow, and may have HOA dues and PMI. Your all-in monthly cost can be meaningfully higher than P&I alone.
2) Fixed-rate vs ARM
A fixed-rate mortgage keeps the same rate for the full term. An ARM (adjustable-rate mortgage) typically offers a lower intro rate, then resets based on an index + margin. ARMs also include caps limiting how much the rate can change at each reset and over the life of the loan.
3) Down payment, LTV, and PMI
Down payment affects LTV (loan-to-value). For many conventional loans, putting less than 20% down may require PMI. Some borrowers prefer a smaller down payment to preserve cash, but it can increase monthly cost.
4) Rates, APR, and points
The interest rate drives your monthly P&I. APR is a broader cost measure that may include certain fees. You can sometimes pay points upfront to lower your rate — it can be worth it if you’ll keep the loan long enough.
5) Common “gotchas”
- Property taxes and insurance vary widely by location.
- ARM payments can rise after the intro period.
- PMI rules differ by loan type and lender.
- HOA dues can materially change affordability.
Next
Use the calculator for scenarios, then check the Glossary for terms you’re unsure about.