What your monthly payment really includes: PITI
The number a lender quotes you is usually just principal and interest — but the check you actually write every month is PITI: Principal, Interest, Taxes and Insurance. On a $350,000 loan at 6.55% over 30 years, principal and interest come to $2,223.76 a month. Add a typical $550 for property tax, homeowners insurance and HOA dues and the real payment is $2,773.76. Budgeting off the smaller number is the most common mistake first-time buyers make, and it is why this calculator asks for those extras up front.
Most lenders collect the taxes and insurance through an escrow account: they add one-twelfth of the annual bills to each payment, hold the money, and pay the county and the insurer when the bills come due. It is convenient, but it also means your payment can change every year even on a fixed-rate loan — when your property is reassessed or your insurance premium rises, the lender runs an escrow analysis and adjusts the monthly amount. The interest rate never moved; the T and the I did.
The principal-and-interest portion itself follows a fixed schedule. In year one of that $350,000 loan, roughly $1,900 of each $2,224 payment is interest, because you owe the most at the start. Twenty years in, the split has flipped. That slow crossover is why extra principal payments made early in the loan save dramatically more interest than the same dollars paid in year twenty — the amortization schedule below shows exactly where you are on that curve.
15-year vs 30-year: the trade-off in real dollars
The term you choose changes the economics more than almost anything else. As of July 2026, Freddie Mac’s survey puts the average 30-year fixed at 6.55% and the 15-year at 5.93% — shorter loans always price lower because the lender’s money is at risk for half as long. On $350,000, the 30-year costs $2,223.76 a month while the 15-year costs $2,940.28. That is $716.52 more each month, which stings — but look at the interest column.
Over its full life the 30-year loan pays about $450,553 in interest, more than the amount you borrowed. The 15-year pays about $179,250. Choosing the shorter term saves roughly $271,303 and hands you a paid-off house 15 years sooner. The honest caveat: the 15-year payment is mandatory every single month, in good years and bad. Many buyers do better taking the 30-year for safety and voluntarily paying extra principal when they can — you capture much of the saving while keeping the right to fall back to $2,224 if a job disappears.
| Monthly P&I — 30-year at 6.55% | $2,223.76 |
| Monthly P&I — 15-year at 5.93% | $2,940.28 |
| Total interest — 30-year | $450,553 |
| Total interest — 15-year | $179,250 |
| Interest saved by the 15-year | $271,303 |
PMI, discount points and closing costs
Put down less than 20% and the lender will almost always require private mortgage insurance. PMI typically runs 0.5% to 1.5% of the loan balance per year — on a $350,000 loan that is $1,750 to $5,250 annually, roughly $146 to $438 added to every monthly payment. The good news is that it is temporary: you can request cancellation once you reach 20% equity, and by law the lender must drop it automatically at 22%. If PMI is the only thing standing between you and buying now, it is often a reasonable toll to pay rather than waiting years to save a full 20% while prices and rents move.
Discount points work in the opposite direction: you pay interest up front to lower the rate. One point costs 1% of the loan — $3,500 here — and typically shaves about 0.25% off the rate. Dropping from 6.55% to 6.30% cuts the payment from $2,223.76 to $2,166.40, a saving of $57.36 a month, so the point pays for itself in about 61 months. The rule is simple: points only make sense if you will keep the loan well past that break-even, so skip them if you expect to sell or refinance within five years.
Finally, budget for closing costs — origination fees, appraisal, title insurance, recording fees and prepaid escrow deposits. They generally total 2% to 5% of the loan, or $7,000 to $17,500 on $350,000, due in cash at the closing table on top of your down payment. You can sometimes roll them into the loan or accept a slightly higher rate in exchange for lender credits, but either way you pay; the only question is up front or monthly.
How much house can you afford? The 28/36 rule
Lenders lean on a screening test called the 28/36 rule: your housing costs (the full PITI payment) should stay under 28% of your gross monthly income, and all debt payments combined — mortgage plus car loans, student loans and credit-card minimums — should stay under 36%. Run the default numbers here backwards: a $2,773.76 total payment needs gross income of about $9,906 a month, or roughly $118,900 a year, to clear the 28% front-end test.
The 36% back-end number is where most approvals actually tighten. If that same household carries a $450 car payment and $300 in student loans, total obligations reach $3,523.76, which is 35.6% of a $9,906 income — passing, but with almost no slack. Pay off the car first and the same income comfortably supports a bigger loan. That is worth knowing before you house-hunt: reducing other debt often raises your budget more effectively than a slightly better rate.
One caution from the trenches: the 28/36 rule is what the lender can approve, not what feels comfortable. It ignores childcare, retirement contributions, and the maintenance that homeownership adds — a common rule of thumb is 1% of the home’s value per year. Plenty of happy homeowners deliberately borrow well under their approval amount. Use the slider to find the payment you would be at ease with even in a lean month, then work back to the price.