Mortgage Rates and Calculator
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Depending on your situation, these questions may vary somewhat, but generally speaking, all prospective borrowers should consider these items at a minimum.
1) What steps are necessary to “pre-qualify” for a mortgage loan from this lender? Are there any costs involved during the pre-qualification process? (e.g. credit report, etc)
2) Assuming you pre-qualify, what interest rates are available for fixed rate and variable rate mortgages? Do these rates require a certain down payment, periods of time for repayment? Is there a pre-payment penalty for any of these offers?
3) With the recent stimulus package that was passed by Congress, are there any incentives or tax breaks that I may qualify for?
4) If this is your first home purchase, are there any FHA loans that I may qualify for? What are the circumstances under which I may be required to purchase mortgage insurance for the lender?
5) Does this lender have a recommendation on who to work with to procure a title insurance policy for the property you’re considering purchasing? Often times, the lender may help you get title insurance at a discounted price. It never hurts to ask, you can always select your own, if you wish.
6) Last, but not least, are there any other costs associated with the mortgage transaction that have not been fully disclosed or that I may not be aware of? Please be advised that this is always the most important question. If takes away the opportunity for the lender to “forget” to mention any associated fees, whether intentional or not.
Getting a mortgage
Mortgage interest rates are calculated on the basis of your monthly payments towards the loan. If you know basics of mortgage and how to calculate the interest rate, you can save some money on your mortgage.
You normally accept mortgage through a local bank or through a lender. But these banks and lenders do not set the mortgage interest rates. Federal Reserve Bank decides the interest rate. Lenders watch the interest rate on ten years bonds. When the yield on ten year bonds change, the interest rate will also change. For a home buyer, the mortgage interest rate depends on factors like closing costs, down payments etc.
There are different types of mortgages. For example, fixed rates mortgages are the one, where the interest rate and the payment will remain the same. In adjustable mortgage, monthly payment changes according to the interest rates.
Mortgage interest rates are also determined by the stock market. If the stock market goes up, the interest rate also goes up. If the stock market crashes, the interest rate will also come down. Another factor that determine the mortgage interest rate is your past credit history. Lender will check the past credit history and also risk of defaulting. If you have a good credit history and a secure job, you can obtain a loan for a fairly low interest rate. The higher the risk, the higher the interest rate will be.
The other factor that determining the mortgage rate by the banks are by loan to value ratio (ltv), by which the bank will give a certain percentage as loan to the actual value of the home. The bank will have less risk by putting more money on homes. In this case the interest rate will be low.
How much you afford depends on how much you can borrow and how much down payment can you make. These two are inter-related which affects the mortgage equation. Many people are in a hurry to sign up for a mortgage without considering the years of financial obligation they are taking on and what impact it will have on their financial condition later on. Mortgage lenders use a mortgage formula to see your monthly mortgage payment come in at less than 28% of your gross income and your total monthly debt payments, including your mortgage, will be less than 36% of your gross income.
A mortgage calculator will help you with a number of statements for you to rate, to help focus on what you want and then suggests approaches for you to assess. Mortgage calculator will tell you how much you can borrow, but they wouldn’t tell you the best way to get the home you want and there are other approaches that may be better for you.
First thing you need to do is to determine your gross monthly income, which is the income you have before you pay taxes and other expenses. If you are married, you can apply for the loan jointly by adding both the income of husband and wife. Next step is to determine your total non-mortgage debt payments such as monthly credit card or car loan repayment etc. Using mortgage calculator you can calculate how much loan you can afford to take considering your repayment capacity.
Remember one thing. Just because the bank is ready to give you loan doesn’t mean that you can really afford to take the loan amount. In reality your specific situation will dictate what type of home and mortgage payment will be best for you.
The last thing a borrower should consider is how comfortable they are with assuming a large amount of debt and the monthly payment obligations. Before you apply for a loan, you should make some level of estimate of how much you spend on a monthly basis to maintain the life-style that you wish to live. Evaluate this against the monthly housing and debt obligations as well as your take home income. If there is not enough money left to meet the debt obligations and still you wish to have the life style you want, then you may reconsider taking a loan.