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Mortgage calculators
Our free calculators can help you make sense of your next home loan.
FHA mortgage calculator
Calculate how much you might pay each month for an FHA loan.
Debt-to-income ratio calculator
Calculate how much your debts take up your monthly income and see how it might affect mortgage qualification.
HELOC calculator
Enter your mortgage information and calculate how much you might be able to borrow for a home equity line of credit.
Comparison calculator
Compare two mortgages and see the true cost of what you’ll pay over time.
Affordability calculator
Calculate how much you might be able to borrow for a new home based on your income and expenses.
More calculation guides
We’re currently working on upgrading our mortgage calculators, but these calculation guides are still available:
- How to calculate your LTV. Learn how to calculate your loan-to-value ratio.
- How to calculate your home equity. Find out how much equity you have in your home.
- How is interest calculated on a mortgage?. Learn what factors go into the amount of interest you pay and how it’s calculated for a home loan.
- How to calculate refinance savings. Learn how to do the math to see if a mortgage refinance is worth it.
Recent home loan articles
WATCH: Beginner’s guide to buying a house
What is a mortgage — and how does it work?
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. Examples of popular property types you could purchase include condominiums, single-family residences and townhomes. 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 as 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.
6 ways to get a better mortgage rate
Look to our six tips for landing the strongest mortgage rates you’re eligible for:
- Compare multiple lenders. Get quotes from at least two lenders for the mortgages you’re interested in.
- Get your credit score in order. A credit score of 740 or higher can open the door to competitive interest rates, low down payments and government programs, like FHA and VA loans. There are options for bad credit but they’re limited.
- Consider paying for points. Crunch the numbers to see how much paying points upfront can save you in the long run, especially if you don’t plan to keep your home for the full term of your loan.
- Qualify for special programs. Government, state and local programs may offer lower rates and more flexible terms than a traditional mortgage.
- Save at least 20%. Often the larger your down payment, the lower your interest rate. You’ll also avoid having to pay PMI.
- Lower your debt-to-income ratio. Your total debt load affects the loans you qualify for. Try to pay down credit cards or loan balances when you’re shopping for the best rate.
The mortgage process
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:
- Find a lender. Shop around until you find a lender and loan you’re comfortable with.
- Apply for your loan. Provide the required information for a lender to assess your risk, and wait for a loan officer to review your details. An underwriter reviews your application and credit report.
- Schedule an appraisal. Your house is appraised and inspected to ensure it meets your bank or financial institution’s standards for lending.
- Review your loan estimate. Carefully consider the details in your estimate before signing for approval.
- Close on your house. Before your closing meeting, you’ll receive a closing disclosure that lists the fees and costs you’ll pay. Sign your documents — and get the keys to your new home.
Frequently asked questions
How does my credit affect my 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.
How much of a down payment do I need?
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.
What are closing costs — and how much can I expect to pay for them?
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.
How does escrow work?
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.
What is private mortgage insurance?
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 remove PMI from your mortgage payment.
PMI typically reflects 0.3% to 1.2% of your mortgage payment.
Can I lock in my interest rate?
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.
What is amortization?
When you take out a mortgage, you agree to pay principal and interest over the life of the loan. Because your interest rate is applied to the balance, as you pay down your balance, the amount you pay in interest changes over time. Amortization ensures your monthly payment doesn’t change over the life of your mortgage.
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.
FAQs
Who is the #1 mortgage lender in the US? ›
Rocket Mortgage and United Shore Financial remained first and second by volume of loans originated in 2021, unchanged from 2019 and 2020.
Who does Dave Ramsey recommend as a mortgage lender? ›It means that Churchill Mortgage is the only mortgage provider trusted by real estate expert Dave Ramsey and the Ramsey team.
What is best way to compare loans? ›- Loan terms to compare. When you're borrowing money, you want to find a loan that meets your needs at the most-affordable terms. ...
- Interest rate and APR. ...
- Collateral. ...
- Fees. ...
- Loan term. ...
- Monthly payment. ...
- The total amount. ...
- Bottom line.
Traditionally, mortgage lenders have more options for homebuyers than banks. Depending on your current financial profile, you may qualify for more than one type of loan. However, you'll find a good fit for you based on your long-term goals, housing needs, current standings.
Is it better to get a mortgage from a mortgage lender or a bank? ›There's no absolute answer when it comes to whether a mortgage lender or a bank will offer a better rate. The mortgage rate you are offered will mostly be based on your credit score, how much debt you already have, where your property is located, your down payment, and the size of the loan you are applying for.