Mortgage loan calculator Term Definitions

The three main loan programs, FHA, Conventional, and VA make up over 90% of mortgage financing. Each program has its advantages, but VA loans are usually better than FHA or Conventional because they don't require a down payment or mortgage insurance. To determine which loan is best for you, it all depends on your income, credit score, credit debt, down payment amount, and the price and condition of the property. It isn't always an easy decision.

Property taxes are almost always included in the total mortgage payment. A good rule of thumb for California is 1.25%. However, property taxes are specific for each individual property and a simple search of the address would not necessarily give you accurate information. Some properties have extra fees such as Mello Roos or special assessments that are added to the property tax amount. Luckily, when you consider all the properties in the state, those extra fees are not very common. Unluckily, in some areas it is very common. Check with your realtor regarding this matter before you decide on a specific property.

FHA loans have mortgage insurance (MIP) that varies based on a variety of factors. As of Feb. 2025 the HUD website references this document: https://www.hud.gov/sites/documents/15-01mlatch.pdf for details. Conventional loans have Private Mortgage Insurance (PMI) that is determined by the company the lender uses for that service. Conventional loan PMI percentage is based on: loan amount, down payment %, and credit score. Example: $500,000, 5% down, with 760 credit score may have a PMI of ~0.19%. With a 640 credit score, the PMI may go up to ~1.1% or more. A higher down payment has a big effect as well. With 20% down on a Conventional loan, there is no PMI. However, if the credit is good, loans with 10% down or 15% down may have very little PMI (<$50/mo). Put it somewhere in the middle (0.85%) unless you have more accurate information, or contact us in order to get an accurate quote. The PMI companies do not have publicly accessible PMI calculators, which is a shame. Note: I get asked all the time what mortgage insurance does. It's basically insurance for the lender (and HUD/FHA and Fannie Mae/Freddie Mac) in case the borrower defaults on the loan. Mortgage Insurance makes FHA and Conventional loans possible with low minimum down payments. Without it, the lenders couldn't do those loans. But it doesn't have any extra benefits for the borrower.

Homeowner's insurance is required. The actual rate is specific to each house by the insurance company that the homebuyer choses. A percentage between 0.35% to 0.40% is a relatively safe estimate, but insurance rates are rising in California and some properties in high risk areas are significantly higher. It is important to search for insurance ASAP once you have chosen a property. The lender does not choose the insurance company for you. We, as your mortgage broker, can recommend companies, but the decision is yours.

Varies on a case by case basis. The majority of the charges are: Property Taxes, Hazard Insurance, Title Insurance, Prepaid Interest and Escrow Company fees. Lenders may or may not have any fees. There are dozens of other smaller fees. A breakdown of the fees can be seen on a Loan Estimate or a Closing Disclosure. It is important to note that the initial Loan Estimate is still just an estimate. The Closing Disclosure, which is only available after the Escrow and Title companies have provided their fees (which can be weeks after a transaction has started), is much more accurate. While it is impossible to know the closing costs ahead of time, a safe estimate is between 2.25% - 2.75% of the sales price.

For FHA loans only. The Up Front Mortgage Insurance Premium (UFMIP) is a fee by the FHA that gets added to the loan amount unless the borrower pays for it directly. It is based on the base loan amount (sales price minus down payment amount). Thus the total loan amount for an FHA loan is the base loan amount plus the UFMIP amount. The UFMIP amount is usually 1.75% as of February 2025 but there are exceptions. As of Feb. 2025 the HUD website references this document: https://www.hud.gov/sites/documents/15-01mlatch.pdf for details.

Varies based on a variety of factors. Similar to FHA UFMIP it is a charge by the VA that gets added to the loan amount unless the borrower pays for it directly. The VA website has the details: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/

The APR is confusing to a lot of people. Sometimes people see the APR, which is represented as a percentage, and worry that are being charged a higher interest rate. However, the APR is very simply the interest rate plus the closing costs which is then recalculated into a percentage. The formula for it is:  APR = (((Interest + Fees) / Loan amount) / Number of days in loan term) x 365 x 100. So, if the interest rate for a $100,000 loan is 6% and there are zero closing costs, the APR would be 6%. If the interest rate were 6% and the closing costs were $2,000, the APR would be 6.186%. The payment for either example would stay the same. The reason for the APR is to be able to compare loans quickly and easily.