CONVENTIONAL LOAN CALCULATOR
Purchasing a home is one of the most significant financial decisions you'll ever make, and understanding your loan options is key to making the right choice. A conventional mortgage calculator is an essential tool that helps you estimate your monthly payments, breaking down the costs into principal, interest, taxes, insurance, and private mortgage insurance (PMI).
Whether you're buying your first home or refinancing, this calculator can provide clarity and help you plan your budget effectively. With an intuitive interface and adjustable fields, you can explore different scenarios and find the loan terms that best suit your needs.
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Conventional Loan Payment
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Principal & Interest
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PMI
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Taxes & Insurance
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Required Down Payment
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Total Loan Amount
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CONVENTIONAL LOAN CALCULATOR
A conventional mortgage calculator simplifies the complex process of estimating monthly mortgage payments. By inputting details like purchase price, down payment, interest rate, loan term, property taxes, and insurance, you can see a detailed breakdown of your payment. This transparency ensures you're well-prepared to manage your finances, giving you confidence as you move forward in the home-buying process. Conventional loans, typically offered by private lenders, are popular due to their competitive interest rates and flexible terms. Use this calculator to understand the costs and benefits of choosing a conventional loan.
Pros and Cons of Conventional Loans
Pros:
- Lower Interest Rates: Conventional loans often offer lower interest rates compared to other loan types.
- Flexible Terms: Choose from various loan term lengths, such as 15 or 30 years, to suit your financial goals.
- No Upfront Mortgage Insurance Premiums: Unlike FHA loans, conventional loans don't require upfront mortgage insurance payments.
- Higher Loan Limits: Conventional loans typically allow for higher borrowing limits, especially for buyers in high-cost areas.
- Avoid PMI with a Larger Down Payment: If you put down 20% or more, you can avoid private mortgage insurance.
Cons:
- Stricter Requirements: Borrowers need a higher credit score and lower debt-to-income (DTI) ratio.
- Higher Down Payment: Conventional loans may require a down payment of at least 3% to 20%.
- PMI for Smaller Down Payments: If you put down less than 20%, you'll be required to pay PMI until you reach 20% equity.
How to Apply for a Conventional Loan
- Check Your Credit Score: Aim for a score of 620 or higher for better approval odds and lower interest rates.
- Determine Your Budget: Use the conventional mortgage calculator to understand what you can afford.
- Save for a Down Payment: Depending on the lender, you'll need at least 3% to 20% of the home's purchase price.
- Gather Documentation: Prepare financial documents, including tax returns, pay stubs, bank statements, and proof of assets.
- Shop for Lenders: Compare offers from different lenders to find the best terms and rates.
- Get Preapproved: A preapproval letter shows sellers you're serious and financially capable.
- Submit Your Application: Provide your lender with all necessary documentation and complete the formal application process.
- Close on Your Loan: Once approved, review the final loan terms and sign the paperwork to secure your mortgage.
Key Definitions
- Principal:
- The amount borrowed to purchase your home.
- Interest:
- The cost of borrowing money, expressed as a percentage of the loan amount.
- Loan Term:
- The length of time you'll take to repay your loan (e.g., 15 or 30 years).
- Private Mortgage Insurance (PMI):
- A type of insurance required for conventional loans with a down payment of less than 20%. PMI protects the lender if you default on your loan.
- Property Taxes:
- Annual taxes assessed by your local government based on the property's value.
- Homeowners Insurance:
- A policy that protects your home and belongings from risks like fire, theft, and natural disasters.
Frequently Asked Questions (FAQ)
- What is a conventional loan?
- A conventional loan is a mortgage that isn't insured or guaranteed by a government agency, like the FHA or VA. These loans are offered by private lenders and typically have stricter credit and income requirements.
- How much down payment is required for a conventional loan?
- Most lenders require at least 3% to 20% of the home's purchase price as a down payment. A larger down payment can help you avoid PMI.
- What credit score do I need for a conventional loan?
- A minimum credit score of 620 is typically required, though a higher score can help you qualify for better rates and terms.
- Can I use a conventional loan to buy an investment property?
- Yes, conventional loans can be used for primary residences, second homes, and investment properties.
- How is PMI calculated?
- PMI is usually calculated as a percentage of your loan amount, ranging from 0.3% to 1.5% annually, depending on your down payment and credit score.
Quick Reference
What You Need to Use the Calculator:
- Purchase price of the home
- Down payment amount or percentage
- Interest rate
- Loan term in years
- Annual property taxes
- Annual homeowners insurance
Benefits of Using the Calculator:
- Estimate monthly payments with accuracy
- Understand the breakdown of principal, interest, PMI, taxes, and insurance
- Explore different scenarios to find the best loan terms
Tips for Lowering Monthly Payments:
- Improve your credit score to qualify for better interest rates.
- Save for a larger down payment to reduce loan amount and PMI costs.
- Shop around for competitive insurance and tax rates.
Riverbank Finance LLC is not part of the Fannie Mae or Freddie Mac. The information provided by this Conventional mortgage calculator is for illustrative purposes only. The default values are hypothetical and may not be applicable to your individual situation. Speak with a licensed loan officer to review rate and terms that may be available for you. The calculated results are intended for illustrative purposes only and accuracy is not guaranteed. PMI rates based on a Fannie Mae Standard Purchase Mortgage with Fixed PMI premiums for 760+ credit score | MGIC mortgage insurance rates dated 04/04/2016.