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Our free calculators can help you make sense of your next home loan.
We’re currently working on upgrading our mortgage calculators, but these calculation guides are still available:
A mortgage is a loan that helps you buy or refinance a property, such as your primary residence, a vacation home or a real estate investment.
The amount that you borrow is called the principal. When you take out a mortgage, your lender charges you interest on the principal each month. The interest is the lender’s profit, which is rolled into your monthly payments. For fixed-rate mortgages, your loan payments gradually pay off both the principal and interest based on an amortization schedule that keeps your payments the same each month.
A home loan is secured using your property as collateral. That means if you miss your mortgage payments, your lender can take your property and resell it to get their money back.
To determine how risky you are a borrower, mortgage lenders consider financial criteria such as your credit score, proposed down payment, assets, debt and income. These details help a lender assess your likelihood of paying back the loan, which ultimately determines approval and your mortgage’s interest rate.
The best mortgage for your situation should meet your needs while providing the lowest rates and terms you’re eligible for.
Look to our six tips to landing the strongest mortgage rates you’re eligible for:
Most mortgage rates are either fixed or adjustable. Fixed-rate mortgages offer a predictable payment each month, while adjustable-rate mortgages fluctuate with the market.
Great for long-term budgeters. A predictable fixed-rate mortgage helps you know exactly how much you’ll pay each month of your term.
Fixed-rate mortgages lock in an interest rate that’s applied over your full loan term of 10, 15, 20, 25 or 30 years. Unlike an adjustable-rate mortgage, your monthly payments don’t change over the course of your loan.
Predictable payments make for easy budgeting, and most mortgages allow you to apply toward your principal any amount you pay over the required amount.
Great for short-term borrowers. If you plan to refinance or sell your home during the fixed period, an adjustable-rate mortgage, or ARM, can extend a lower rate than a fixed-rate mortgage during an initial fixed term — but avoid the adjusted rate that could significantly raise your monthly payment.
Adjustable-rate mortgages come with an initial interest rate that resets to the prevailing rate after a time specified in your loan contract. Unlike a fixed-rate mortgage, your payments rise or fall depending on the current market rate. But lenders typically cap how high or low your rate can go.
A hybrid ARM is a type of adjustable-rate mortgage that begins with a fixed rate that’s followed by an adjustable-rate period. After a term of five to 10 years, your rate adjusts to match market conditions — raising or lowering your monthly payment.
You can get a mortgage from most banks and credit unions and through brokers that work with networks of lenders looking to connect with borrowers. Most lenders require at least some footwork with a loan officer by phone or in person, but at least a few newer digital companies advertise fully-online mortgages.
Of the many types of mortgages advertised, most fall into two general categories: conventional and government-insured.
Conventional mortgages are loans designed for purchasing property that are not offered or backed by a government entity. Because they conform to limits set by government housing agencies, they attract low interest rates. But they come with fewer of the perks — like low down payments — offered through FHA and other government-backed loans.
Two main types of conventional loans are:
Learn more about conventional loans
The Federal Housing Administration backs FHA loans designed to help first-time or lower-income homebuyers who don’t have the hefty savings required for a down payment. These loans allow financing of up to 96.5% of a home’s value and accept lower credit scores than other mortgages. Because of the lower down payments that don’t meet the 20% threshold required to avoid it, they also require private mortgage insurance — or PMI — an additional cost that protects lenders from default.
Military members and their families may be eligible for a mortgage backed by the US Department of Veterans Affairs without having to pay money down or mortgage insurance. Other benefits of a VA loan include low interest rates and no prepayment penalties.
The US Department of Agriculture insures USDA home loans designed for low- to medium-income borrowers buying real estate in an eligible rural or suburban area.
As the name suggests, interest-only mortgages allow you to allocate your monthly payment toward your loan’s interest only for the first five or 10 years of your term.
They offer smaller payments than a traditional mortgage, but those payments won’t reduce your loan’s principal. Many interest-only loans also require a large “balloon” payment at the end of your interest-only term and refinancing to pay off what remains. Despite this, they can be an option for properties you don’t intend to own long.
Fees vary by bank and loan, but common fees come down to establishing your risk as a borrower, your potential property’s value and the costs of transferring ownership of your new home. Your lender may also pass along attorney, postal and other administrative fees.
Credit report fee | $30–$40 | Gives your potential lender an idea of their risk in taking you on as a borrower. |
---|---|---|
Appraisal fee | $300–$500 | Proves that your property is worth the sale price and protects the lender if it needs to sell your property to recoup costs. |
Origination fee | 0.5%–1% of loan amount | Administrative fee for processing your loan application. |
Title insurance fee | $1,000–$5,000 | Paid at closing, the lender’s title insurance protects the lender, while the owner’s title insurance protects you. |
Title search fee | $75–$100 | Determines whether a seller has the right to sell a property to a buyer. |
Survey fee | around $350 | Required in select states to ensure that property lines and boundaries are correct. |
Closing fee | 2%–5% | Fee to the attorney or company handling your closing. |
Private mortgage insurance | 0.3%–1.2% of loan | Kicks in as a monthly payment if you put down less than 20% of your purchase price. |
Inspection fees | $200–$400 | Uncovers any nasty hidden surprises within your new home. |
Homeowners insurance | $300–$3,000, yearly | Required for mortgages as part of your monthly payment or paid separately with proof you’re covered. |
Points | 1% of the loan | Optional cost that reduces your interest rate, saving you money on your monthly payments. |
While other factors might affect the mortgage process, such as the type of loan, these are generally the steps borrowers take when buying a home:
Buying a house is among the biggest — and most exciting — investments most of us will make. Set yourself up for long-term success by narrowing down the type of mortgage that fits your needs, budget and property. A strong rate and term can provide peace of mind and save you thousands over the life of your mortgage.
A strong credit score can result in more favorable rates and terms on your loan. Lenders consider your credit score and financial history when determining how much money you can borrow, the type of mortgage you’re eligible for, the size of your down payment, your rate and other costs associated with your loan.
Most lenders like to see a down payment that reflects 20% of the agreed-on home price. Some low down payment options may allow as little as 3% of the purchase price of the home up front.
Closing costs are fees and taxes that come with transferring ownership of a property. These costs vary by lender, state and the size and type of property. Expect to pay around 1.15% of the cost of the home, depending on the lender, your state and the size and type of your property.
Your lender may set up an escrow account to collect funds for property taxes and insurance so that the money is available when your bills come due. With an escrow account, your lender pays your taxes and insurance on your behalf. Your monthly mortgage payment is divided into principal, interest and the money due to your escrow account.
PMI is insurance designed to reduce lender risk by protecting them against homeowner default on the mortgage. It’s often required when a homebuyer puts down less than 20% of the purchase price of the home. After you’ve built up at least 20% in equity, you can ask your lender to remote PMI from your mortgage payment.
PMI typically reflects 0.3% to 1.2% of your mortgage payment.
Yes, with many lenders. Locking in your rate protects you against rate increases for a specified time. But it also means you’re locked in at a higher rate if the market softens.
Some lenders offer a one-time float down that adjusts your rate to the new lower rate if the market fluctuates.
At the beginning of your loan, a hefty percentage of your payment is applied to interest. With each subsequent payment, you pay more toward your balance.
Let’s say you’re repaying a 30-year mortgage for $400,000 at 4.5% interest. According to your mortgage’s amortization schedule, your first payment is $2,027. But amortization means that payment allocates $1,500 to interest and only $527 to the principal. By the time you make your last payment, you’re paying only $8 in interest and $2,019 toward the balance.
Kimberly Ellis is a writer at Finder. She hails from New York City with a BA from Queens College and a New York State teaching certificate. After teaching in both public and private schools, Kimberly decided to take the world by storm and dive into the media industry — where she covers everything from home loans and investing to K–12 education and shopping. She’s also an aspiring polyglot, always in a book and forever on the hunt for the perfect classic red lipstick.
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Would you suggest starting ѡith a free platform like WordPress
οr go for a paid option? Tһere are sо mаny options out therе that Ι’m completely overwhelmed ..
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Hi Rhys,
Thank you for reaching out to finder!
It is nice and exciting to hear that you are aspiring to be a writer. Free platforms would not hurt to start with, reading reviews and also doing intensive research on the basics of being a writer. Also, you may want to check videos on youtube and free tutorials. Once that you have all what you need to start and might think that you need to learn more, it would not hurt to pay for additional training.
Hope this helps!
Please do not hesitate to contact us back is there is anything else
Regards,
Val
I bought a house with my now ex-fiance. She is keeping the house. I am wanting to get my name off of all legal documents, loan, mortgage, everything. How can I get that started without having to go through the court system?
Hi Christian,
Thanks for getting in touch with finder. I hope all is well with you. :)
You would need to first talk to your ex-fiance. From there you need to come up with your terms and conditions on how you should be able to shake off all the responsibilities related to the property. You would also need to get your mortgage provider involved in your discussion. In most cases, you would be able to accomplish this without going through the court system. However, if in case you need legal advice, you might as well speak to a lawyer or someone who is an expert in handling real estate documents.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
I just started a new job and I’m looking to buy a house that is going to hit the market. The lady has agreed to hold off on posting it to the market until I can find out if I can get approved or not.
Hi Hhess8,
Thanks for reaching out.
It’s good to know that the owner has accommodated your request. Since time is of the essence with your deal with the owner, you may enlist the services of a mortgage broker who will assess your needs and help you find a suitable home loan. This may save you time and effort in finding the right lender as they have access to a range of home loans from a variety of banks and lenders.
Kind regards,
Liezl
My husband and I are looking to buy a home and I work a full time job but my husband is self employed who gets 1099 and paystubs monthly. However when we file taxes each year, we have a lot of deductibles which leaves very little income to show. We make enough money, but banks won’t approve us. How can we do a low doc and how does that work
My husband and I are looking to buy a home and I work a full time job but my husband is self employed who gets 1099 and paystubs monthly. However when we file taxes each year, we have a lot of deductibles which leaves very little income to show. We make enough money, but banks won’t approve us. How can we do a low doc and how does that work
Reply
Hi Mark,
Thank you for your inquiry.
While we are a financial comparison website and general information service we are not mortgage experts and don’t offer any of the products or services on our website. You can compare a range of loans in the market, alternatively you can reach out to a mortgage broker who will take all your circumstances into account and offer you a range of lending options.
I hope this information has helped.
Cheers,
Harold
Hello Brenda,
Thank you for your inquiry.
Low doc home loans are types of loans offered as a way of meeting the requirements of small business owners. They are designed for self-employed people who otherwise wouldn’t be able to get a home loan due to their inability to show how much they earn using traditional methods. Generally, the eligibility requirements from lender to lender will differ, but in most cases you’ll be required to have a proof of your business and to supply the self-certification of your income plus good credit history. You would still need to prepare some deposit just like a regular home loan does.
It is also of worth to check other options such as joint application, or FHA mortgages.
Hope this helps.
Cheers,
Jonathan