What a Mortgage Really Costs in 2026: Closing Costs, PMI, Points, Pre-Approval and 15 vs 30 Years
Short answer: on a $600,000 home with 20% down at today's 7.4% average, plan on about $3,323 a month for principal and interest, roughly $900 more for taxes and insurance, $10,000–$24,000 at closing, and about $716,000 of interest over 30 years. Every one of those numbers has a lever; this guide shows which ones move.
1. The monthly payment and how interest works
A fixed-rate mortgage charges interest each month on the remaining balance. Early on the balance is large, so most of the payment is interest; the split shifts slowly toward principal. On a $480,000 loan at 7.4%, the first payment of $3,323 contains $2,960 of interest and $363 of principal. After ten years you still owe about $418,000. That slow start is why extra principal payments in the first years are worth far more than the same payments later, and why the Mortgage Calculator shows a year-by-year amortization table.
| $480,000 loan, 30-yr fixed | 6.5% | 7.0% | 7.4% | 7.9% |
|---|---|---|---|---|
| Monthly P&I | $3,034 | $3,193 | $3,323 | $3,489 |
| Total interest, 30 years | $612,000 | $670,000 | $716,000 | $776,000 |
2. 15-year vs 30-year
The 15-year average (6.73% on October 8, 2026) sits about 0.65 points below the 30-year. On $400,000 the 15-year payment is $3,535 against $2,770 for the 30-year — $765 more a month — but total interest falls from about $597,000 to $236,000. The honest comparison is not "which is cheaper" but "can I carry $765 more every month for 15 years, including the year I lose a job." A common middle path: take the 30-year for flexibility and pay it like a 20-year when you can; the extra principal is optional, the 15-year payment is not.
3. Down payment: 3%, 5%, 10% or 20%
| Down payment on $600,000 | Cash needed | Loan | PMI/MIP? | Typical minimum program |
|---|---|---|---|---|
| 3% ($18,000) | $18,000 + closing | $582,000 | Yes, PMI | Conventional 97 / HomeReady (first-time, income limits) |
| 3.5% ($21,000) | $21,000 + closing | $579,000 | Yes, FHA MIP | FHA, credit 580+ |
| 5% ($30,000) | $30,000 + closing | $570,000 | Yes, PMI | Conventional, credit 620+ |
| 10% ($60,000) | $60,000 + closing | $540,000 | Yes, lower PMI | Conventional |
| 20% ($120,000) | $120,000 + closing | $480,000 | No | Any; best pricing |
| 0% | Closing only | $600,000 | No PMI; VA funding fee instead | VA (eligible service), USDA (rural, income limits) |
Putting less than 20% down is not a mistake if the alternative is renting for five more years at rising rents; it simply adds mortgage insurance until you reach 20% equity. Loan amounts above the conforming limit (set each year by FHFA; $806,500 for most counties in 2025, higher in high-cost areas like the Bay Area) are jumbo loans with their own pricing and usually 10%–20% minimum down.
4. PMI and FHA mortgage insurance
Private mortgage insurance (PMI) applies to conventional loans with under 20% down. It costs roughly 0.3%–1.5% of the loan per year depending on credit score and down payment — on a $570,000 loan, $140 to $710 a month — and is cancelled automatically at 78% loan-to-value or on request at 80%. A 760 score with 10% down might pay 0.4%; a 660 score with 5% down might pay 1.2%. Lender-paid PMI trades the monthly fee for a higher rate; it is rarely cheaper over more than five years.
FHA mortgage insurance (MIP) has two parts: 1.75% of the loan paid upfront (usually rolled in) and an annual premium of 0.55% for most 30-year loans with under 5% down. Unlike PMI, FHA MIP lasts the life of the loan if you put down less than 10%; the way out is refinancing to conventional once you have 20% equity (see the Refinancing Guide).
5. Closing costs, line by line
Expect 2%–5% of the loan amount: $9,600–$24,000 on a $480,000 loan. The Loan Estimate every lender must give you within three business days of application splits them into sections; the ones you can shop are the ones that differ.
| Item | Typical cost | Who sets it |
|---|---|---|
| Lender origination, underwriting, processing | 0.5%–1.5% of loan | Lender — compare |
| Discount points (optional) | 1% per point; lowers rate ≈0.25 | Your choice |
| Appraisal | $450–$800 | Lender orders |
| Title search, lender's and owner's title insurance | $1,500–$4,000 | Shoppable in most states |
| Escrow / settlement fee | $500–$1,500 | Shoppable |
| Transfer taxes and recording | Varies widely by county/state | Government |
| Prepaid interest, first-year insurance, tax escrow | $3,000–$8,000 | Not a fee — money you'd pay anyway |
| Home inspection (before closing) | $400–$700 | You |
Sellers can contribute toward closing costs (up to 3%–6% depending on loan type and down payment), and in a slower market they often do. Ask.
6. Points: when buying the rate down pays
One point costs 1% of the loan and typically lowers the rate by about 0.25 points. On $480,000, a point costs $4,800 and saves about $81 a month, so break-even is roughly 59 months. Buy points only if you will keep the loan well past that, and never with money you need for reserves. The APR Calculator shows the points-adjusted APR of any quote.
7. Pre-approval: what it is and what it is not
A pre-approval is a lender's conditional commitment based on verified income, assets and credit; a pre-qualification is an estimate based on what you told them. Sellers' agents look for the former. The process takes a few days and needs two years of W-2s or tax returns, two months of bank statements, recent pay stubs, and ID. A pre-approval is valid for 60–90 days, and it is not a rate lock: rates can move between pre-approval and contract, which is exactly the gap the Rate Shock Calculator measures. Do not change jobs, open credit cards, finance a car or move large sums between accounts between pre-approval and closing — all four trigger re-underwriting.
8. How much house, really
Lenders will approve up to about 43% back-end debt-to-income. That is the ceiling, not the recommendation. A household earning $144,000 a year ($12,000 a month) with $950 of other debts could be approved for roughly $4,200 of housing payment — about $456,000 of loan at 7.4% once taxes and insurance are carved out of it — but would be house-poor at that level. The DTI Calculator shows both the maximum and the room you have under it; How Much House Can You Afford walks through the full method with 2026 numbers.