US State Mortgage Calculators

How US Mortgages Compare to Canadian and Other Countries

US mortgages have several unique features compared to Canada and other major countries:

• Longer Fixed Terms: 30-year fixed-rate mortgages are standard in the US, while Canada typically has 5-year terms with 25-30 year amortizations.
• Tax Deductions: Mortgage interest is generally tax-deductible in the US for most homeowners, which is not the case in Canada.
• Property Taxes: Property tax rates vary significantly by state and even by county, ranging from under 0.5% to over 2.4% of a home's value.
• PMI vs. CMHC: In the US, Private Mortgage Insurance (PMI) is required for down payments under 20%, similar to Canada's CMHC insurance, but with different rate structures.
• Transfer Taxes: Many US states have real estate transfer taxes or deed stamps, but they typically range from 0.1% to 2.2%, lower than some Canadian provinces.
• Closing Costs: US closing costs often include attorney fees, title insurance, and escrow fees, with total costs averaging 2-5% of the purchase price.
• Prepayment Freedom: Most US mortgages have minimal or no prepayment penalties, unlike Canadian mortgages which often have stricter penalties.

In Canada: Shorter term mortgages (typically 5 years) with 25-30 year amortizations are common, with renewal at current rates after each term. Canada has the CMHC insurance for down payments under 20%, and mortgage interest is not tax-deductible for primary residences.

Globally: Many European countries have variable-rate mortgages or shorter fixed periods. In Germany, for example, mortgages often require 20-40% down payment, while Japan offers mortgages with terms up to 35 years. The US market is considered highly competitive with numerous loan products available to homebuyers.

Understanding Property Taxes in the United States

Property taxes are a significant consideration when calculating the true cost of homeownership in the United States. Unlike federal income tax, which is consistent nationwide, property taxes vary dramatically by location:

• State Variations: Property tax rates range from lows of 0.30-0.40% in states like Hawaii and Alabama to highs exceeding 2.4% in New Jersey.
• Local Control: Property taxes are primarily determined at the local level (county, city, or school district), resulting in variations even within the same state.
• Assessment Methods: States assess property values differently—some use market value, others use a percentage of market value as the tax base.
• Homestead Exemptions: Many states offer exemptions or credits that reduce property tax for primary residences, particularly for seniors, veterans, or disabled homeowners.
• Payment Methods: Property taxes are typically paid annually or semi-annually, often through an escrow account managed by your mortgage servicer.

Property Tax Comparison by State

The highest property tax states include New Jersey (2.49%), Illinois (2.27%), and New Hampshire (2.05%), while the lowest include Hawaii (0.30%), Alabama (0.41%), and Colorado (0.51%). Note that low property tax states may compensate with higher sales or income taxes, so the overall tax burden should be considered.

Tax Appeals and Assessments

Property owners in all states have the right to appeal their property tax assessment if they believe it's inaccurate. The process varies by jurisdiction but typically involves providing evidence that the assessed value exceeds the property's actual market value.

Property tax information in our calculators is based on average effective rates by state and may not reflect specific local variations. For precise information, consult your county tax assessor or a tax professional.

First-Time Home Buyer Programs in the United States

The United States offers various federal, state, and local programs to assist first-time homebuyers. Understanding these options can significantly reduce your upfront costs and monthly payments:

Federal Programs

• FHA Loans: Backed by the Federal Housing Administration, these loans allow down payments as low as 3.5% and have more flexible credit requirements.
• VA Loans: Military service members and veterans can qualify for 0% down payment loans with competitive rates and no PMI requirement.
• USDA Loans: For rural and some suburban properties, these loans offer 0% down payment options for moderate to low-income borrowers.
• Fannie Mae/Freddie Mac: These conventional loan programs offer options with as little as 3% down for qualified first-time buyers.
• Good Neighbor Next Door: Teachers, law enforcement, firefighters, and EMTs can purchase HUD homes at 50% off the list price in revitalization areas.

State and Local Programs

Most states offer additional assistance programs through their housing finance agencies, including:

• Down Payment Assistance: Grants or forgivable loans to help with down payment and closing costs.
• Tax Credits: Some states offer Mortgage Credit Certificates (MCC) that provide a tax credit for a portion of mortgage interest paid.
• Discounted Interest Rates: State-sponsored mortgage programs with below-market interest rates for qualified buyers.
• Closing Cost Assistance: Programs that cover some or all closing costs for eligible buyers.

Qualification Tips

To maximize your chances of qualifying for first-time buyer programs:

• Complete a HUD-approved homebuyer education course (often required for assistance programs).
• Check income limits for your area—many programs are designed for low to moderate-income households.
• Maintain a credit score of at least 580-620 for most government-backed programs.
• Save for minimum required down payments (typically 3-3.5% for assistance programs).
• Research specific programs in your state and city—local assistance can often be more generous than federal options.

First-time homebuyer status typically means you haven't owned a home in the past three years, not necessarily that you've never owned a home before.

Understanding PMI (Private Mortgage Insurance)

Private Mortgage Insurance (PMI) is a type of insurance that protects the lender if a borrower defaults on their conventional mortgage. Here's what you need to know:

When PMI is Required

• PMI is typically required when a borrower makes a down payment of less than 20% on a conventional mortgage.
• Government-backed loans handle mortgage insurance differently: FHA loans require Mortgage Insurance Premium (MIP), which functions differently from PMI.
• VA loans do not require mortgage insurance but charge a one-time funding fee.

PMI Costs

• Cost Range: PMI typically costs between 0.5% and 1.5% of your loan amount annually.
• Factors Affecting Cost: Your down payment amount, credit score, loan term, and loan type all impact your PMI rate.
• Payment Methods: Most commonly paid as a monthly premium added to your mortgage payment, but can also be paid as a one-time upfront premium or a combination of both.

Removing PMI

Unlike FHA's MIP (which often lasts for the life of the loan), PMI can be removed:

• Automatic Termination: Lenders must automatically terminate PMI when your loan balance reaches 78% of the original value of your home.
• Borrower-Requested Cancellation: You can request PMI cancellation when your loan balance reaches 80% of the original value.
• Early Removal: If your home has appreciated in value, you may be able to remove PMI earlier by getting a new appraisal to prove you have 20% equity.
• Refinancing: If you've built sufficient equity, refinancing into a new loan without PMI may be an option.

PMI Alternatives

• Lender-Paid PMI: The lender pays the insurance premium in exchange for a higher interest rate on your loan.
• Piggyback Loans: Taking out a smaller second mortgage (often called an 80-10-10 loan) to cover part of the down payment and avoid PMI.
• Special Programs: Some lenders offer low down payment options without PMI for well-qualified borrowers.

While PMI adds to your monthly costs, it can enable homeownership years earlier than waiting to save a 20% down payment, potentially allowing you to build equity sooner in appreciating real estate markets.