Conventional Home Loan Calculator

How to Use the Conventional Home Loan Calculator

1. Enter Purchase Price
2. Enter Down Payment – either percentage or dollar amount. As you adjust the price, it will keep the same percentage.
3. Adjust your interest rate
4. Select Loan Term – Most of our clients choose a 30 year loan, which is the maximum on Conventional loans.
5. Adjust PMI – if your down payment is less than 20%, it will allow you to estimate your PMI (see below).
6. Enter Annual Taxes, Insurance, and monthly HOA fees (if applicable)

How to Estimate Private Mortgage Insurance (PMI) on a Conventional Loan

Private mortgage insurance (PMI) is typically required if your down payment is less than 20% on a conventional loan. Fannie Mae guarantees a mortgage up to 80% of the value of a home. In order to loan more than that, lenders require PMI for any amount over 80%. Here’s how PMI is calculated and how you can estimate your PMI rate:

Determine Your Loan-to-Value (LTV) Ratio

• LTV = Loan Amount / Home Value
  • Example: $400,000 loan on a $500,000 home = 80% LTV
• If your LTV is over 80%, you’ll need some sort of PMI

Understand PMI Cost Factors

PMI rates typically range from 0.1% to 0.9%, and the exact rate depends on:

• Credit Score – higher credit scores = lower PMI
  • PMI credit tiers are every 20 points (700, 720, 740, etc.). So if your credit score is a 739, your factor is the same as a 720. If you’re only a couple of points off the next tier, it’s worth working on increasing your score.
• Down Payment / LTV – higher down payment or more equity = lower PMI
  • PMI LTV tiers are 85%, 90%, 95%, and 97%. The LTV determines the amount of coverage that is required. If you put 7% down, you will pay the 5% down rate because you didn’t hit the 10% down tier.
  • If your income is under 80% of the area median income, you likely qualify for HomeReady or Home Possible that require less PMI coverage (lowering your PMI rate).
• Number of Borrowers – multiple borrowers (and each of their credit scores) can change PMI
• Debt to Income Ratio – higher (and lower) than average debt to income ratios can influence PMI rates
  • The DTI we use is before the PMI, which a lot of lenders miss.
  • PMI DTI tiers depend on the provider. Generally, PMI rates increase over 45% DTI, and improve under 30% DTI.
• Additional Factors – Loan Type (fixed or ARM), Loan Term, Loan Amount, Self Employed, Occupancy, and the type of home (condo and manufactured homes will have increased rates)

PMI Rate Estimates

Below are sample PMI rate estimates on different borrower profiles. Remember, actual rates can vary based on your exact scenario and the lender you use. This is intended for educational purposes and not an advertisement for any specific loan program or down payment requirements.

• Scenario 1: 780+ Credit, 1 borrower, 40% DTI – different LTV
  • 97% LTV = 0.30% – 0.38%
  • 95% LTV = 0.19% – 0.22%
  • 90% LTV = 0.15% – 0.17%
  • 85% LTV = 0.10% – 0.11%
• Scenario 2: 95% LTV, 1 borrower, 40% DTI – different credit
  • 780 fico = 0.19% – 0.22%
  • 760 fico = 0.19% – 0.23%
  • 740 fico = 0.29% – 0.35%
  • 720 fico = 0.36% – 0.41%
  • 700 fico = 0.45% – 0.52%
  • 680 fico = 0.59% – 0.70%
  • 660 fico = 0.95% – 1.29%
  • 640 fico = 1.04% – 1.37%
  • 620 fico = 1.15% – 1.45%

This is why FHA loans can make more sense for borrowers with lower than 700 credit scores. The majority of our conventional loans fall within 0.15% – 0.4% range. If you’d like to compare Conventional vs. FHA, you can use our FHA Loan Calculator, or our Mortgage Payment Calculator.

Estimate Your Monthly PMI Premium

• Multiply your loan amount by your estimated PMI rate to get your annual premium, then divide by 12.
  • Example: $400,000 loan x 0.45% (0.0045) = $1,800/yr, or $150/mo

When Can I Remove PMI?

PMI isn’t forever! There are 3 different ways to remove PMI. You must qualify with an on-time payment history, and the LTV limits below are based on 1 unit owner occupied homes.

1. Automatic Termination at 78% LTV of original value
2. Request Termination at 80% LTV of original value – you must initiate this request with your servicer.
3. Request Termination based on Current Value – this is helpful if your home value has increased quickly, either through appreciation or improvements. The value and any improvements will be verified by the servicer, occasionally with a small inspection fee.
   • No Improvements
     • 75% if the loan is at least 2 years old
     • 80% if the loan is 5 years old
   • Improvements – If you have made substantial improvements that have increased your property value (renovations, additions, etc.), the 2 year requirement is waived and the LTV requirement is 80%.

There are 8 different mortgage insurance providers, and their rates adjust daily. These providers do offer upfront PMI (rather than monthly). Upfront PMI typically makes sense if you plan on keeping the mortgage for at least 4-5 years, and you don’t plan on removing PMI during that period.

Make sure your lender is shopping all of them and using the best rate. We have access to an investor that issues their own PMI rates, and their PMI rates are consistently lower than the standard 8 mortgage insurance providers.