Looking for the best mortgage rates? A great place to start is a mortgage calculator, which lets you estimate your monthly house payment and get a better sense of how much house you can afford. Armed with that knowledge, you can narrow your🍬 home search and find the right mortgage—and the best rates.

Use a Mortgage Calculator to Get the Best Rates

Buying a home may be the biggest and most important fiꦇnancial decision of your life, and you will likely need a mortgage to fund the🐓 purchase.

A helpful first step is to use a 澳洲幸运5官方开奖结果体彩网:mortgage calculator, which estimates your monthly house payment, including principal, interest, taxes, and insurance—collectively known as "PITI." The estimate allows you to try out various scenarios to determine a realistic price ran🍃ge for your home search.

To use a mortgage calculator, you'll enter a few details about the loan, including:

• Home price: The purchase price of the home.
• Down payment: The cash you pay upfront to buy a home.
• Loan term: The amount of time you have to repay the loan.
• Loan APR (interest rate): The cost to borrow the money.
• Property taxes: The annual tax you pay as a real property owner, levied by your city, county, or municipality.
• Homeowners insurance: Your annual cost to 澳洲幸运5官方开奖结果体彩网:insure your home and 🦄personal belongings against theft, fire, natural disasters, personal liability claims, and other covered perils.
• HOA fees: The monthly amount you pay to your 澳洲幸运5官方开奖结果体彩网:homeowners' association to help cover the costs of maintaining and improving the properties in the association. 

It's easy to change one or more variables (and it's recommended that you do so) to see how it would affect your monthly mortgage payment, mortgage interest, and the total cost of the loan.

For example, if you choose a shorter loan term, your payments will be higher, but you'll pay less interest over the life of the loan. And, of course, if you have a higher interest rate, your monthly payment will be higher—and so will the total interest.

Types of Mortgages

Depending on factors such as your credit score, employment history, and 澳洲幸运5官方开奖结果体彩网:debt-to-income (DTI) ratio, your lender may offer a prime rate mortgage, a subprime mortgage, or something in ꩵbetween, called an “Alt-A” mortgage. Here's a closer look at each:

Prime Mortgages

澳洲幸运5官方开奖结果体彩网:Prime borrowers are considered less risky by lenders. According to the Consumer Financial Protection Bureau (CFPB), these borrowers typically have credit scores of at least 660, but the exact cut-off varies by lender.

Candidates for prime mortgages also have to make a considerable down payment—typically 10% to 20%—the idea being that if you’ve got skin in the game you’re less likely to default. Because borrowers with better credit scores and DTIs tend to be lower risk, they are offered the 澳洲幸运5官方开奖结果体彩网:lowest interest rates, which💞 can save tens of thousands𝓡 of dollars over the life of the loan.

Prime mortgages meet the quality standards set forth by Fannie ♕Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation). These are👍 the two government-sponsored enterprises that provide a secondary market in home mortgages by purchasing loans from originating lenders.

Subprime Mortgages

澳洲幸运5官方开奖结果体彩网:Subprime mortgages are offered to borrowers who have lower credit ratings and FICO credit scores that fall in the 580–619 range, though the exact cutoff depends on the lender. Because of the increas🌄ed risk to lenders, these loans carry higher intere🐻st rates.

There are several ki🍸nds of subprime mortgage structures. The most common is🐎 the adjustable-rate mortgage (ARM), which charges a fixed “teaser rate” at first, then switches to a floating rate, plus margin, for the remainder of the loan.

澳洲幸运5官方开奖结果体彩网:An exam🌠ple of an ARM is a 2/28 loan, which is a 30-year mortgage that has a fixed interest rate for the first two years before being adjusted. While these loans often start with a reasonable inter🌸est rate, once they switch to the higher variable rate the mortgage payments increase substantially.

Alt-A Mortgages

澳洲幸运5官方开奖结果体彩网:Alt-A mortgages (aka alternative A-paper mortgages) fall somewhere in between the prime and subprime categories. One of the defining characteristics of an Alt-A mortgage is that it is typically a low-doc or no-doc loan, meaning the lender doesn’t require much (if any) documentation to prove a borrower’s income, assets, or expenses.

This opens the door to fraud🍸ulent mortgage practices, as both lenders and borrowers can exaggerate numbers in order to secure a larger mortgage (which means more money for the lender and more house for the borrower).

In fact, after the 澳洲幸运5官方开奖结果体彩网:subprime mortgage crisis of 2007–08, they 🅷became known as “liar loans” because borrowers and lenders were able to exaggeraꦜte income and/or assets to qualify the borrower for a bigger mortgage.

While Alt-A borrowers typically have credit scores of at least 700—well above the cutoff for subprime loans—these loans tend to allow relatively low down payments, higher 澳洲幸运5官方开奖结果体彩网:loan-to-value (LTV) ratios, and more flexibility whe🐷n it comes 🃏to the borrower’s DTI.

These concessions enable certain borrowers to buy 澳💧洲幸运5官方开奖结果体彩网:more house than they 💃can reasonably afford, increasing the likelihood of default. That being said, low-doc and no-doc loans can be helpful if you actually have a good income but can’t substantiate it because you earn🐟 it spor🔯adically (for example, if you’re self-employed).

Because Alt-As are viewed as somewhat risky (falling somewhere between prime and subprime), 澳洲幸运5官方开奖结果体彩网:interest rates tend to be higher than those ofꦚ prime mo💫rtgages but lower than subprime. 

Getting the Best Possible Mortgage Deal

Obviously, the higher the interest rate, the more you pay each month, and the more you ultimately pay for your home. To 澳洲幸运5官方开奖结果体彩网:compare the best mortgage rates🐷, let’s take a look at a 30-year fixed-rate mortgage f🌺or $200,000.

At the prime rate—say, 4.6% for this example—your monthly payment would be $1,025. Over the life of the loan, you would pay $169,103 in interest, so you’d actually pa♉y back a total of $369,103.

Now assume you get the same 30-year fixed-rate mortgage for $200,000, but this time, you a🔯re offered a subprime rate of 6%. Your monthly payment would be $1,199, and you’d pay a total of $231,676 in interest, bringing the total amount yoඣu pay back to $431,676. That seemingly small change in interest would cost you $62,573.

Lenders and mortgage brokers may be competitive, but they generally are under no obligation to offer you the best deal available. It’s well worth the effort to shop around. Taking the time to find a better interest rate can save you tens of thousands of dollars over t🌠he course of a loan.

Tips to Find the Best Mortgage Rates

This is not the time to let somebody else do 🔜the shopping for you. As we saw just now, the terms you get can make a sizable difference in what you pay to borrow the same amount of money.

How do you aඣvoid paying more than you need to for your mortgage? Certainly, compare the offers you get by running th𒁏em through your online mortgage calculator to see what your payments and interest will be. And as you do—or even before you do—follow the steps below.

1. Improve Your Credit Score

If you’re looking for a home right now, getting your finances in great shape may be tough. So try to think ah🌄ead; maybe even postpone house-hunting until you can clean your financial house.

In general, the better your credit, the better the interest rate lenders will offer you. So, do what you can to improve your credit score by paying ཧoff credit card balances and other personal debts to the best of your ability.

Even aꦿ 20-point difference in your score could move your rate up or down more than 0.25%. On a $250,000 home, one-qua💛rter of a point might mean an extra $12,000 or more paid in interest over the life of the loan—an extra $33 a month.

2. Save for a Down Payment

The more you can put down, the lowไer your mortgage payment and the less interest you’ll pay over time. A higher down payment could even mean a lower interest rate. Providing a 30% down payment (vs. the conventional 20%), for ൲example, could drop your rate by more than 0.5%.

3. Gather Info on Your Income and Em♏ployment History

Lenders generally want to see two consecutive years of steady income and employment to ensure you can afford your mortgage payments and repay the loan over the long haul. If you’re a salaried employee, lenders ask for W-2 forms and federal tax returns for the past two years to verify your income. Lenders also check with your employer to verify how long you’ve worked there. If your earnings h🐽ave gone down or you’ve had gaps in employment in the last two years, lenders are skeptical of your ability to afford a mortgage, and you might have trouble getting a mortgage pre-approval.

Similarly, self-employed borrowers have to jump through more hoops to 澳洲幸运5官方开奖结果体彩网:get a mortgage. If you are self-employed, expect to pay higher interest rates than what you see online; those rates are for borrowers who are considered more c𓃲reditworthy because of their steady, verifiable incomes and excellent credit scores.

Lenders also generally have stricter rules for verifying self-employment income. Not only will you ღneed to provide federal tax returns for two years, but you’ll also need to submit a signed statement 🐼from an accountant, a profit/loss sheet, and other documentation to show sufficient business income.

4. Know Your Debt-to-Income Ratio

Lenders care about how much debt you have in relation to your gross monthly income. To calculate your DTI, lenders look at your employment and income history. This calculation plays a key part in determining your mortgage rate. If you can show proof of your income for a full-documentation loan, you’ll get more competitive rates and terms than other loan types for self-employed borrowers, such as a no-docume💟ntation loan or stated income/stated asset loan.

To calculate a borrower’s DTI, lenders evaluate two formulas: a “front-end ratio” and the “back-end ratio.” The front-end ratio (also called the housing ratio) combines all mont𝔍hly housing costs (mortgage payment, homeowner’s insurance, property taxes, HOA f🐟ees, etc.). This sum is then divided by your gross monthly income. The back-end ratio (or total debt) combines all monthly installment and revolving debts (think credit cards, car loans, and student loans) and the proposed mortgage payment and divides the sum by your gross monthly income.

In evaluating these ratios, lenders presume that the higher your DTI, the more lℱikely you are to default on your loan. Generally, lenders want to see a front-end ratio no higher than 28% and a maximum back-end ratio of 36%.

5. Use a Mortgage Calculator

A mortgage calculator estimates what your monthly payments might look like based on the inputs you provide. Try different scenarios to find your optimal mortgag꧂e, with monthly payments you can comfortably afford—and total interest costs you can live with. For example, you might find that you could swing higher payments with a 15-year mortgage if you m🐠ake a larger down payment.

6. Consider Interest Rates and Closing Costs

The interest rate is important, but there’s more to compare. Is there a prepayment penalty if you decide to refinance at some point? What are the total 澳洲幸运5官方开奖结果体彩网:closing costs? Closing costs generally amount to 2% to 5% of the price of the home. If your home costs $150,000, expect to pay $3,000 to $7,500 in costs. That’s a big range, so it behooves you to see what a lender typical♉ly charges.

7. Consider Private Mortgage Insurance

Though they do count towards the overall cost of your mortgage, closing costs are a one-time hit. But there's another bite that keeps on biting. If your down payment is less than 20%, you’re considered a higher risk and may be required to carry private mortgage insurance (PMI).

This makes you a safer bet for the lender. The trouble is, you're the one paying for it—to the tune of 0.5% to 1% of the entire loan each year. That can add thousands of dollars to the cost of carrying the loan. If you do end up having to pay for PMI, make sure it stops as soon as you've gained enough equity in your house to be eligible.

8. Make a Decision

Let’s say you get the most amazing mortgage deal. Congratulations, but move fast. The interest rate—and possibly other conditions—are locked in for a set amount of time. You have to close within the 澳洲幸运5官方开奖结果体彩网:lock period or risk losing the deal. Don’t procrastinate.

The Bottom Line

Most of the work involved inဣ getting the lowest mortgage rate happens long before you’re ready to apply. A stellar credit꧙ score and a sizable down payment are the best ways to lower your rate.

Do your own shopping, mortgage calculating, and comparing. Also, remember that just because you qualify for a certain size mortgag𓃲e, there’s nothing that🅠 says you have to borrow that much.