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A typical mortgage payment includes four components: Principal (reduces your loan balance), Interest (cost of borrowing), Property Tax (usually escrowed by lender), and Insurance (homeowners + PMI if down payment < 20%). This is often called PITI.

Private Mortgage Insurance (PMI) is required by most lenders when your down payment is less than 20% of the home price. It protects the lender — not you — if you default. PMI typically costs 0.5%–1.5% of the loan amount per year and can be cancelled once you reach 20% equity.

A larger down payment reduces your loan principal (lower monthly payment), eliminates PMI if >= 20%, and may qualify you for a lower interest rate. A 20% down payment on a $400,000 home = $80,000 down, $320,000 loan.

Amortization is the process of paying off a loan over time with regular payments. Early in the mortgage, most of each payment goes toward interest. Over time, more goes toward principal. After 30 years of payments, the loan is fully paid off.

A 15-year mortgage has higher monthly payments but significantly less total interest paid (often 40-50% less). A 30-year mortgage has lower monthly payments, freeing cash flow for other investments. The best choice depends on your income stability and investment alternatives.

Rates vary by market conditions, credit score, loan type, and term. As of 2024-2025, 30-year fixed rates range 6-8%. A credit score above 740 typically qualifies for the best available rates. Always compare multiple lenders.