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Frequently Asked Questions
Monthly payment uses the formula: M = P × [r(1+r)^n] / [(1+r)^n – 1]
Where P = loan amount, r = monthly rate (annual rate ÷ 12), n = total months. A $400,000 loan at 7% for 30 years = $2,661/month.
Use the 28/36 rule: housing costs ≤ 28% of gross monthly income, total debt ≤ 36%. For $100,000/year income (~$8,333/month), max housing = ~$2,333/month. Factor in taxes, insurance, and HOA fees.
PMI (Private Mortgage Insurance) is required when down payment < 20%. Costs 0.5–1.5%/year. You can request removal when you reach 20% equity (based on original value). It automatically cancels at 22% equity under the Homeowners Protection Act.
15-year: Higher monthly payment, much less total interest, build equity faster. 30-year: Lower monthly payment, more financial flexibility, but pays 2–3× more interest over the life. Choose 15-year if you can comfortably afford the higher payment.