First-time homebuyers often ask us how much their mortgage payment should be, but the answer varies based on individual situations and scenarios.
Some of the factors that go into determining your monthly mortgage payment may include your home’s value and the purchase price, your interest rate (as determined by the broader market conditions and your financial health), and your down payment amount.
The factors that determine your monthly mortgage payment
The price of your home
Most importantly, your mortgage monthly payment amount is based on the total amount you borrowed (known as the principal). A more expensive home will result in a higher monthly payment.
The size of your down payment
The down payment is the amount of money you pay upfront when you purchase a property, and it can have a significant impact on your monthly mortgage payment.
A larger down payment means borrowing less money and a lower monthly mortgage payment. Your mortgage principal only includes the amount you borrowed, so the less you borrow, the less you’ll have to pay monthly.
Common loan programs include:
- FHA (Federal Housing Administration)
- RD – Rural Development (also known as USDA)
- VA – Only available to veterans and active military
Each loan program has various requirements for down payment, and each program’s interest rate varies slightly. Some loans also require additional monthly mortgage insurance (such as FHA loans), which may increase your monthly payment.
Choosing the right loan program involves crunching the numbers to determine what works best for you. A Loan Officer can help you crunch those numbers, and our pre-approvals are free!
Your Interest Rate
The higher the interest rate, the higher your payment will be. Your interest rate will depend on several factors such as your credit score, your income, and your debt-to-income ratio, in addition to broader market conditions.
Here are the current interest rate trends in Michigan. Remember, your individual rate is determined by your financial profile, and you should expect your rate may differ from the ones listed below:
*Displayed interest rates represent industry trends, and do not represent rates offered by Treadstone Funding or Neighborhood Loans. For an accurate, up-to-date quote on mortgage rates, please talk to a licensed Loan Officer.
Monthly Mortgage Insurance
If you don’t put down 20%, you’ll likely have monthly mortgage insurance added to your payment. For FHA and RD loans, this is standard for almost all loans. VA loans don’t have monthly mortgage insurance, but do have an upfront funding fee in closing costs.
In most cases, your city taxes will be rolled into your monthly payments, using an escrow account.
An escrow is part of your monthly payment, where money is collected separately from your mortgage principal & interest to pay toward miscellaneous expenses like property taxes. Each month, this money is deposited into that separate account, and when your yearly taxes become due, they are automatically paid from that account.
Homeowners insurance is often included in monthly payments through an escrow account, like property taxes. You will be able to find your own homeowners insurance (or we can recommend agents), and the payments for insurance will be paid from your monthly escrow payment.
Insurance premiums are based on factors such as your home’s value, age, condition, and risk analysis. (flood zones, etc).
Thinking of buying a home in Michigan soon?
If you are currently shopping around for your next home and would like to know what your average monthly mortgage payment might be, get in touch with a mortgage expert!
Terms and qualification are subject to underwriting approval and can change without notice. Not all borrowers may qualify. Credit score and down payment examples are for illustrative purposes.
Each program’s interest rate varies slightly.