Question 1

How is my monthly mortgage payment calculated?

Accepted Answer

Your monthly payment includes principal, interest, property taxes, and homeowners insurance (PITI). The principal and interest portion is calculated using your loan amount, interest rate, and loan term using a standard amortization formula.

Question 2

What is a good debt-to-income ratio?

Accepted Answer

Most lenders prefer a back-end DTI of 43% or less. A DTI below 36% is considered excellent. Some government-backed loans may allow DTIs up to 50% with compensating factors.

Question 3

How much down payment do I need?

Accepted Answer

Conventional loans typically require 5-20% down. FHA loans require as little as 3.5%. VA and USDA loans may offer 0% down. A 20% down payment eliminates private mortgage insurance (PMI).

Question 4

When should I refinance my mortgage?

Accepted Answer

Consider refinancing when rates drop 0.5-1% below your current rate, when you want to switch from an adjustable to fixed rate, or when you need to change your loan term. Use our refinance calculator to see your potential savings and break-even point.

Question 5

What are typical closing costs in California?

Accepted Answer

Buyer closing costs in California typically run 2-3% of the purchase price. This includes loan origination, appraisal, title insurance, escrow fees, recording fees, and prepaid items. Seller costs are typically 6-8% including real estate commissions.

Question 6

Is it better to rent or buy?

Accepted Answer

It depends on how long you plan to stay, local market conditions, your financial situation, and personal preferences. Generally, buying becomes more favorable the longer you stay due to equity buildup and home appreciation. Use our rent vs buy calculator to compare your specific situation.

Question 7

What is the difference between pre-qualification and pre-approval?

Accepted Answer

Pre-qualification is a quick estimate based on self-reported information. Pre-approval involves a full application, credit check, and income verification, resulting in a conditional commitment from the lender. Pre-approval carries much more weight when making an offer.

Question 8

How do property taxes work in California?

Accepted Answer

California property taxes are based on the purchase price (Proposition 13) and can only increase by a maximum of 2% per year. The base rate is about 1% of assessed value, plus any local bonds or assessments, typically totaling 1.1-1.25%.

Mortgage Calculator FAQ