Mortgage FAQ — Home Loans, PMI, DTI & Refinancing
Get plain-English answers about mortgage affordability, DTI, PMI, refinancing, HELOCs, closing costs, and comparing home loan options.
Frequently Asked Questions
How much house can I afford based on my income?
Many lenders use the 28/36 rule: your housing payment should be no more than 28% of gross monthly income, and your total debt should be no more than 36%. As a rough shortcut, that may work out to about 3–4 times your annual gross income, depending on your down payment, debts, and current rates. Use the Affordability Calculator to estimate your price range using your actual numbers.
How much house can I afford on a $70,000 or $100,000 salary?
It depends more on your existing debt, down payment, credit, interest rate, and local taxes than on salary alone. As an illustrative example, someone earning $70,000 with minimal debt and 10% down might see a range around $230,000–$280,000, while someone earning $100,000 might see roughly $330,000–$400,000. These are estimates, not lending limits; run your own numbers with the Affordability Calculator.
Is the 28/36 rule still accurate in 2026?
The 28/36 rule remains a useful conservative budgeting guideline. Many lenders may approve a back-end DTI above 36%, sometimes around 43%–45% or higher depending on the loan program and compensating factors such as strong credit or cash reserves. Qualifying for more does not necessarily mean the payment will feel comfortable.
What's included in my monthly mortgage payment (PITI)?
PITI stands for Principal, Interest, Taxes, and Insurance. Private mortgage insurance may be added when your down payment is below 20%, and HOA dues may also affect your real monthly housing cost. The Mortgage Calculator breaks out the main payment components so you can budget beyond principal and interest.
How much do I need for a down payment?
It depends on the loan type: some conventional loans allow as little as 3% down, FHA loans generally require 3.5%, and eligible VA or USDA borrowers may qualify with 0% down. A 20% down payment can avoid conventional PMI, but using all your savings for a down payment may not be best for everyone. Use the Down Payment Planner to build a savings timeline.
What is a good debt-to-income ratio for a mortgage?
A back-end DTI at or below 36% is a conservative target, while many conventional programs allow up to roughly 45% and FHA programs may allow higher ratios with compensating factors. Below 20% is often considered excellent. Limits vary by lender, loan program, credit profile, and the strength of the rest of your application. Check yours with the DTI Calculator.
What's the difference between front-end and back-end DTI?
Front-end DTI counts only housing costs, including the mortgage, taxes, insurance, and sometimes HOA dues. Back-end DTI adds other recurring debts such as car loans, student loans, credit card minimums, and personal loans. Lenders generally focus heavily on back-end DTI because it reflects your full monthly debt load.
Does DTI use gross or net income?
Mortgage DTI is calculated using gross income, which is your pay before taxes and other deductions. That can make your qualifying ratio look healthier than your take-home budget feels, so it is wise to compare the result with your actual monthly cash flow.
How can I lower my DTI to qualify for a mortgage?
Paying down revolving debt such as credit cards can reduce your monthly obligations quickly. Avoid opening new credit before applying, consider a lower purchase price or larger down payment, and document all eligible income. Even reducing monthly debt by $200–$300 can change your qualification picture, but the impact depends on the lender's underwriting rules.
When does PMI automatically cancel?
For many eligible conventional loans, PMI is scheduled to terminate when the balance reaches 78% of the home's original value, assuming the loan is current and other requirements are met. You can generally request cancellation earlier when the balance reaches 80% of the original value by contacting your servicer. Use the PMI Calculator to estimate your projected cancellation date.
How do I get rid of PMI faster?
You can pay extra principal to reach 20% equity sooner, ask your servicer whether a new appraisal can support cancellation based on increased value, or refinance into a conventional loan at 80% LTV or below. Refinancing has closing costs and may change your interest rate, so compare the total savings before committing.
Is refinancing to remove PMI worth it?
Only if the numbers work for your situation. Compare your expected PMI savings with closing costs and any change in interest using a break-even calculation: closing costs divided by monthly savings equals the months to break even. If you expect to stay past that point, refinancing may be worth considering. The Refinance Calculator can run the comparison.
Does FHA mortgage insurance (MIP) go away like PMI?
No. FHA mortgage insurance premium follows different rules from conventional PMI. For FHA loans with less than 10% down, annual MIP generally lasts for the life of the loan; with at least 10% down, it generally lasts 11 years. Refinancing into a conventional loan may remove the insurance once you have enough equity and qualify. Compare the trade-offs with FHA vs. Conventional.
How do I know if refinancing is worth it?
Calculate your break-even point by dividing total closing costs by your monthly payment savings. For example, $8,000 in costs divided by $200 in monthly savings equals 40 months. If you expect to keep the loan longer than the break-even period, refinancing may make sense, but also compare the new loan term and total interest.
What's a good interest rate to refinance for?
There is no universal rate threshold. A drop of 0.5%–1% is a common starting point, but the right answer depends on your current rate, closing costs, loan balance, new term, and how long you will keep the loan. Your break-even math is more useful than a rule of thumb.
Should I roll closing costs into my refinance?
You can often add refinance closing costs to the new loan balance, but you will pay interest on those costs over time. As an illustrative example, $10,000 financed for 30 years at 7% could cost roughly $20,000–$25,000 after interest. Paying upfront is usually cheaper long-term if you have the cash and plan to keep the loan.
Are mortgage points worth buying when I refinance?
Points may be worthwhile if the monthly savings recover the upfront cost before you sell or refinance again. One point typically costs 1% of the loan amount and may lower the rate by about 0.20%–0.25%, though the actual discount varies by lender and market. Use the Mortgage Points Calculator to find your break-even period.
HELOC vs. cash-out refinance — which is better?
If your current first-mortgage rate is well below today's rates, a HELOC can let you access equity without replacing that lower-rate mortgage. A cash-out refinance may make more sense when current rates are close to or below your existing rate, or when you prefer one combined payment. Compare the total cost, rate structure, and repayment terms with the HELOC Calculator.
How much equity do I need to open a HELOC?
Many lenders want you to keep at least 15%–20% equity after the HELOC, so your combined loan-to-value is often limited to about 80%–85%. The exact limit depends on the lender, credit profile, property type, income, and other underwriting factors. Your available line is based on the equity that remains after the existing mortgage.
Are no-closing-cost HELOCs actually free?
Usually not completely. A lender may waive upfront fees but charge them back if you close the line within a stated period, often two or three years. Ask about waived fees, minimum draw requirements, annual fees, and inactivity charges before comparing offers.
How much are closing costs on a home purchase?
Buyer closing costs commonly run about 2%–5% of the purchase price, although the actual amount varies by location, lender, loan type, and prepaid taxes and insurance. On a $400,000 home, that is an illustrative range of roughly $8,000–$20,000. Costs can include lender fees, title services, appraisal, recording fees, and prepaid items. Use the Closing Costs Estimator for an itemized estimate.
Is it better to rent or buy right now?
It depends on how long you plan to stay, local rent and home prices, maintenance, taxes, insurance, and what you could do with your savings. Buying may be more favorable over a longer horizon, while renting can be less expensive short-term after accounting for transaction costs and repairs. The Rent vs. Buy Calculator compares your specific assumptions.
ARM vs. fixed-rate mortgage — which should I choose?
A fixed-rate mortgage provides predictable payments and is often the safer choice if you expect to stay long-term. An adjustable-rate mortgage may offer a lower initial rate, which can make sense if you expect to sell or refinance before the adjustment period, but future payments can change. Review the adjustment terms and compare both options with ARM vs. Fixed.