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A common rule is that your monthly housing costs (mortgage principal, interest, taxes and insurance — PITI) should not exceed 28% of your gross monthly income. Your total debt payments (housing + car loans, student loans, credit cards) should not exceed 36-43% of gross monthly income. For example, on a $80,000 annual income ($6,667/month), aim for housing costs under $1,867/month.

PMI stands for Private Mortgage Insurance. Lenders require it when your down payment is less than 20% of the home price (LTV above 80%). PMI typically costs 0.5-1.5% of the loan amount per year, added to your monthly payment. Once your equity reaches 20% of the original home value, you can request PMI cancellation.

A 30-year mortgage has lower monthly payments but you pay significantly more interest over the life of the loan. A 15-year mortgage has higher monthly payments but you build equity faster and pay far less total interest — often 50-60% less. For example, on a $300,000 loan at 6.5%, a 30-year mortgage costs about $140,000 more in interest than a 15-year mortgage.

Mortgage points (also called discount points) are upfront fees paid to the lender at closing in exchange for a lower interest rate. One point equals 1% of the loan amount. For example, paying 1 point on a $300,000 loan costs $3,000 upfront but reduces your rate, lowering monthly payments. Whether points are worth it depends on how long you plan to stay in the home.

A 20% down payment avoids PMI and results in lower monthly payments and less total interest. However, many buyers put down less — FHA loans allow as little as 3.5% down, and conventional loans can go as low as 3% for qualifying borrowers. A larger down payment means a smaller loan, lower monthly payments and less interest paid overall.

For a conventional mortgage, most lenders want a credit score of 620 or higher, with 740+ getting the best rates. FHA loans accept scores as low as 580 (or 500 with a 10% down payment). VA loans and USDA loans may be available with lower scores. A higher credit score means lower interest rates and can save tens of thousands over the loan term.