Mortgage Calculator Guide 2026: What Every Homebuyer Needs to Know

Buying a home is the largest financial decision most people will ever make. In 2026, the median home price in the United States is approximately $410,000, and 30-year fixed mortgage rates hover around 6.5–7.0%. Understanding how your mortgage payment is calculated — and what factors drive it — is essential for making a smart purchase.

What Makes Up Your Monthly Mortgage Payment

Your total monthly housing payment typically includes four components, often called PITI:

• Principal: The portion that pays down your loan balance. Early in the loan, this is a small fraction of your payment; it grows over time as interest charges decrease.
• Interest: The cost of borrowing, calculated on your remaining balance. At 6.75% on a $328,000 loan, your first month's interest alone is roughly $1,845.
• Taxes: Property taxes vary widely by location, typically 0.5–2.5% of your home's assessed value annually. The national average is approximately 1.1%.
• Insurance: Homeowners insurance protects against damage and liability. Annual premiums average $1,500–$2,500 depending on location and coverage.

Understanding PMI (Private Mortgage Insurance)

If your down payment is less than 20% of the purchase price, most lenders require Private Mortgage Insurance (PMI). PMI typically costs 0.5–1.5% of your loan amount annually, added to your monthly payment. On a $328,000 loan, that is an extra $137–$410 per month.

PMI can be removed once your loan-to-value ratio reaches 80% (meaning you have 20% equity). Some borrowers choose to pay a larger down payment specifically to avoid PMI, while others prefer to buy sooner with a smaller down payment and accept the PMI cost temporarily.

Fixed-Rate vs Adjustable-Rate Mortgages in 2026

A fixed-rate mortgage locks your interest rate for the entire loan term — typically 15 or 30 years. Your principal-and-interest payment never changes, making budgeting predictable. This is the most popular choice, especially in uncertain rate environments.

An adjustable-rate mortgage (ARM) starts with a lower introductory rate (often 0.5–1% below comparable fixed rates) that resets after an initial period — commonly 5, 7, or 10 years. After the fixed period, the rate adjusts annually based on a benchmark index. ARMs can save money if you plan to sell or refinance within the introductory period, but they carry the risk of significantly higher payments after the reset.

Down Payment Strategies

While 20% down avoids PMI, many buyers purchase with less. Common options include:

• Conventional loans: As little as 3–5% down for qualified buyers. PMI required until 20% equity.
• FHA loans: 3.5% down with a credit score of 580+. Requires both upfront and annual mortgage insurance premiums.
• VA loans: 0% down for eligible veterans and active military. No PMI required.
• USDA loans: 0% down for eligible rural and suburban properties. Income limits apply.

How to Get the Best Mortgage Rate

Your mortgage rate depends on several factors you can influence:

• Credit score: Scores above 740 typically unlock the best rates. Each 20-point improvement can save 0.125–0.25% on your rate.
• Down payment size: Larger down payments signal lower risk and often earn better rates.
• Debt-to-income ratio: Keep your total monthly debt payments below 36–43% of gross income.
• Shop multiple lenders: Get at least 3–5 quotes. Rate differences of 0.25–0.5% are common and can save tens of thousands over the life of the loan.
• Consider buying points: Paying 1% of the loan amount upfront can reduce your rate by 0.25%. This pays off if you plan to stay in the home long-term.