A general rule is that your housing costs (including mortgage, taxes, insurance, and HOA) shouldn't exceed 28% of your gross monthly income. Your total debt payments (including housing, car loans, student loans, credit cards) shouldn't exceed 36% of gross income. For example, if you earn $6,000/month gross, aim for housing costs under $1,680 and total debt under $2,160. However, this is just a guideline—consider your lifestyle, other financial goals, emergency fund, and job stability. Many financial experts suggest being even more conservative, especially in high cost-of-living areas or if you have irregular income!

A 15-year mortgage has higher monthly payments but saves you massive amounts on interest and builds equity faster. A 30-year mortgage has lower monthly payments, making it more affordable month-to-month, but you'll pay significantly more interest over time. Example: On a $280,000 loan at 6%, a 15-year costs $2,364/month but saves over $200,000 in interest compared to a 30-year at $1,679/month. Choose 15-year if you can comfortably afford higher payments and want to build wealth faster. Choose 30-year if you need lower payments, want more monthly cash flow flexibility, or plan to invest the difference. Many people choose 30-year loans but make extra payments to get the best of both worlds!

Private Mortgage Insurance (PMI) is insurance that protects the lender (not you!) if you default on your loan. It's required when you put down less than 20% on a conventional loan, typically costing 0.5% to 1% of the loan amount annually ($100-$200/month on a $280,000 loan). To avoid PMI: 1) Put down 20% or more upfront, 2) Use a piggyback loan (like an 80-10-10 structure with a second mortgage), 3) Look into lender-paid PMI (higher rate but no separate PMI payment), 4) Consider VA or USDA loans if you qualify (no PMI required), or 5) Request PMI removal once you reach 20% equity through payments or home appreciation. PMI automatically drops at 78% LTV on conventional loans.

Mortgage points (also called discount points) let you "buy down" your interest rate by paying upfront. One point equals 1% of the loan amount and typically reduces your rate by 0.25%. For example, paying $2,800 (1 point on a $280,000 loan) might drop your rate from 6.5% to 6.25%, saving about $40/month. Calculate your break-even point: $2,800 ÷ $40 = 70 months (5.8 years). Pay points if: you plan to stay in the home longer than the break-even period, you have extra cash at closing, and you're prioritizing long-term savings. Skip points if: you might move soon, you'd rather keep cash for emergencies or renovations, or if rates are likely to drop (allowing refinancing). It's purely math—run the numbers for your specific situation!

Extra payments toward principal have a massive impact! Every extra dollar goes directly to reducing your loan balance, which means less interest charged over time. Example: On a $280,000 loan at 6.5% for 30 years (payment $1,770/month), adding just $200 extra per month saves $108,000 in interest and pays off the loan 8 years early! Even one extra payment per year (13 payments instead of 12) saves about $65,000 and cuts 5 years off a 30-year mortgage. Make sure to specify that extra payments should go toward principal, not just advance your due date. The earlier in the loan term you make extra payments, the more impact they have. This is literally one of the best investments you can make—guaranteed return equal to your mortgage rate!

Your total monthly mortgage payment typically includes PITI: Principal (paying down the loan balance), Interest (the cost of borrowing), Taxes (property taxes, usually held in escrow), and Insurance (homeowner's insurance, also escrowed). You might also pay: PMI if you put down less than 20%, HOA fees if you're in a homeowners association, and possibly flood insurance if you're in a flood zone. Some lenders require you to escrow taxes and insurance (meaning they collect it monthly and pay it on your behalf), while others let you pay these directly. Your actual "mortgage payment" to the lender might be just principal and interest, but budgeting for the full PITI amount (plus HOA and PMI if applicable) gives you the true cost of homeownership. Always ask lenders for a complete breakdown!

Fixed-rate mortgages keep the same interest rate for the entire loan term—predictable and stable. Great when rates are low or you plan to stay long-term. Adjustable-rate mortgages (ARMs) have rates that change periodically, typically starting lower but potentially increasing later (e.g., a 5/1 ARM is fixed for 5 years, then adjusts annually). ARMs can save money if you'll move or refinance before adjustments kick in, or if you expect rates to drop. In 2024-2025, with elevated rates, many experts favor fixed-rate mortgages for the certainty. However, a 7/1 ARM might make sense if you're absolutely certain you'll move within 5-7 years. Never bank on refinancing to save you from ARM increases—plan for worst-case scenarios. For most people, especially first-time buyers, the peace of mind from a fixed rate is worth paying a bit more.

Refinancing typically makes sense when: 1) Interest rates drop at least 0.5-1% below your current rate, 2) You can recoup closing costs (usually 2-5% of loan amount) within 2-3 years through monthly savings, 3) You want to shorten your loan term (e.g., 30-year to 15-year) while keeping payments similar, 4) You need to remove PMI after building equity, or 5) You want to switch from an ARM to fixed-rate for stability. Example: If refinancing costs $5,000 but saves $200/month, you break even in 25 months. Stay longer and you save! Also consider: your current loan age (refinancing resets the clock), your credit score (higher scores get better rates), and your plans (don't refi if you're moving soon). Use a refinance calculator to run your specific numbers—sometimes the answer surprises you!

The traditional answer is 20% to avoid PMI and get the best rates, but it's not always the best choice. Consider: 20% down eliminates PMI, reduces your loan amount and interest paid, and makes you a stronger buyer. However, smaller down payments (3-10%) let you buy sooner, preserve cash for emergencies and home repairs, and potentially invest the difference for higher returns. First-time buyers can often put down as little as 3-3.5% (FHA loans). VA and USDA loans require 0% down. The right answer depends on: your savings, local market competitiveness, current interest rates, your income stability, and whether you have other high-interest debt. Don't drain your emergency fund for a larger down payment! Many successful homeowners put down 5-10%, pay a bit of PMI temporarily, and build wealth through homeownership and smart investing. Run the numbers for your situation!

Minimum credit score requirements vary by loan type: Conventional loans typically require 620 minimum (but 740+ gets the best rates), FHA loans accept 580 (or 500 with 10% down), VA loans officially have no minimum but lenders usually want 580-620, and USDA loans typically require 640+. However, minimum doesn't mean optimal! Every 20-point increase in your credit score can lower your interest rate, potentially saving thousands over the loan term. For example, a 620 score might get you 7.5% while a 760 score gets 6.5%—that's $150+/month difference on a $300,000 loan! Before applying, check your credit, dispute errors, pay down credit cards (especially to under 30% utilization), don't open new credit, and pay all bills on time. If your score is borderline, spending 6 months improving it before buying could save you $50,000+ over the life of the loan!