Morgage Basics: What you Should Know Before Buying a Home

Buying a home is one of the most significant investments you'll ever make, and a mortgage is a crucial component of the process. A mortgage is a type of loan that helps you finance the purchase of a home or real estate. While the concept of a mortgage may seem overwhelming, understanding the basics can help you make informed decisions when it comes to choosing a mortgage that's right for you.

When you apply for a mortgage, the lender will evaluate various factors such as your credit history, income sources, and debt levels to determine if you qualify for a loan. This information also helps the lender to determine your interest rate and how much of a down payment you will need to make. As a general rule of thumb, it is recommended to put down at least 20% of the purchase price as a down payment. If you can't afford a down payment of 20%, you may be required to purchase private mortgage insurance (PMI).

There are various types of mortgages available, and each type offers unique terms and conditions. Some of the most common types of mortgages include fixed-rate mortgages, adjustable-rate mortgages, and government-backed loans. Fixed-rate mortgages have a stable interest rate that remains the same throughout the loan term, while adjustable-rate mortgages (ARMs) have an mortgage rate that fluctuates over time. Government-backed loans are backed by federal agencies such as the Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), and the Veterans Administration (VA).

Loan Type

Purchase Refinance with Cash out Refinance

State

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District Of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming

FICO Score

Superior (780-850) Exceptional (760-779) Excellent (740-759) Very Good (720-739) Good (700-719) Above Average (680-699) Average (660-679) Fair (640-659) Need Improvement (620-639) Poor (350-620)

Loan Amount

$

Points

Up to 0 points Up to 0.5 points Up to 1 points Up to 1.5 points Up to 2 points Up to 2.5 points Up to 3 points

LTV

%

Loan Term

 15-Year Fixed  20-Year Fixed  30-Year Fixed  5-Year ARM  7-Year ARM  10-Year ARM

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The lenders whose rates and other terms appear on this chart are ICB's advertising partners. They provide their rate information to our data partner RateUpdate.com. Unless adjusted by the consumer, advertisers are sorted by APR from lowest to highest. For any advertising partners that do not provide their rate they are listed in advertisement display units at the bottom of the chart. Advertising partners may not pay to improve the frequency priority or prominence of their display. The interest rates, annual percentage rates and other terms advertised here are estimates provided by those advertising partners based on the information you entered above and do not bind. Any lender Monthly payment amounts stated do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Although our data partner RateUpdate.com collects the information from the financial institutions themselves, the accuracy of the data cannot be guaranteed. Rates may change without notice and can change intraday. Some of the information contained in the rate tables including but not limited to special marketing notes is provided directly by the lenders. Please verify the rates and offers before applying for a loan with the financial institution themselves. No rate is binding until locked by a lender.

Lender

APR / Rate

Fees / Points

Payment

NMLS #2562839

4.924%

15-Year Fixed

4.750%

$4,625

Includes 0.875 points for $3,500

Lender Fees: $1,125

$3,112 /mo

Next >

NMLS #2473786

4.934%

15-Year Fixed

4.750%

$4,887

Includes 0.948 points for $3,792

Lender Fees: $1,095

$3,112 /mo

Next >

NMLS #1835285

5.007%

15-Year Fixed

4.875%

$3,500

Includes 0.875 points for $3,500

Lender Fees: $0

$3,138 /mo

Next >

NMLS #1935422

License: 60DBO-109262

5.047%

15-Year Fixed

4.750%

$7,933

Includes 0.662 points for $2,648

Lender Fees: $5,285

$3,112 /mo

Next >

NMLS #324599

License: 324599

5.063%

15-Year Fixed

4.875%

$5,070

Includes 1.000 points for $4,000

Lender Fees: $1,070

$3,138 /mo

Next >

NMLS #757416

5.140%

15-Year Fixed

4.990%

$3,960

Includes 0.990 points for $3,960

Lender Fees: $0

$3,162 /mo

Next >

NMLS #1935422

License: 60DBO-109262

5.300%

5-Year ARM

5.125%

$7,925

Includes 0.660 points for $2,640

Lender Fees: $5,285

$2,178 /mo

Next >

NMLS #2473786

5.361%

5-Year ARM

5.250%

$4,967

Includes 0.968 points for $3,872

Lender Fees: $1,095

$2,209 /mo

Next >

NMLS #6606

5.381%

15-Year Fixed

5.240%

$3,708

Includes 0.927 points for $3,708

Lender Fees: $0

$3,214 /mo

Next >

NMLS #1954591

License: 60DBO-113383

5.402%

15-Year Fixed

5.250%

$4,035

Includes 0.732 points for $2,928

Lender Fees: $1,107

$3,216 /mo

Next >

NMLS #1025894

5.508%

15-Year Fixed

5.375%

$3,480

Includes 0.695 points for $2,780

Lender Fees: $700

$3,242 /mo

Next >

NMLS #1835285

5.578%

5-Year ARM

5.500%

$3,439

Includes 0.735 points for $2,940

Lender Fees: $499

$2,272 /mo

Next >

NMLS #1835285

5.817%

30-Year Fixed

5.750%

$2,927

Includes 0.607 points for $2,428

Lender Fees: $499

$2,335 /mo

Next >

NMLS #1935422

License: 60DBO-109262

5.827%

30-Year Fixed

5.625%

$8,917

Includes 0.908 points for $3,632

Lender Fees: $5,285

$2,303 /mo

Next >

NMLS #2562839

5.847%

5-Year ARM

5.750%

$4,229

Includes 0.776 points for $3,104

Lender Fees: $1,125

$2,335 /mo

Next >

NMLS #2473786

5.861%

30-Year Fixed

5.750%

$4,847

Includes 0.938 points for $3,752

Lender Fees: $1,095

$2,335 /mo

Next >

NMLS #2562839

5.867%

30-Year Fixed

5.750%

$5,125

Includes 1.000 points for $4,000

Lender Fees: $1,125

$2,335 /mo

Next >

NMLS #324599

License: 324599

5.979%

30-Year Fixed

5.875%

$4,570

Includes 0.875 points for $3,500

Lender Fees: $1,070

$2,367 /mo

Next >

NMLS #757416

6.045%

30-Year Fixed

5.990%

$2,376

Includes 0.594 points for $2,376

Lender Fees: $0

$2,396 /mo

Next >

NMLS #1954591

License: 60DBO-113383

6.106%

5-Year ARM

5.990%

$5,035

Includes 0.982 points for $3,928

Lender Fees: $1,107

$2,396 /mo

Next >

NMLS #6606

6.205%

30-Year Fixed

6.125%

$3,420

Includes 0.855 points for $3,420

Lender Fees: $0

$2,431 /mo

Next >

NMLS #1025894

6.208%

30-Year Fixed

6.125%

$3,520

Includes 0.705 points for $2,820

Lender Fees: $700

$2,431 /mo

Next >

NMLS #399799

6.218%

30-Year Fixed

6.125%

$4,111

Includes 0.696 points for $2,784

Lender Fees: $1,327

$2,431 /mo

Next >

NMLS #1954591

License: 60DBO-113383

6.220%

30-Year Fixed

6.125%

$4,083

Includes 0.744 points for $2,976

Lender Fees: $1,107

$2,431 /mo

Next >

NMLS #324599

License: 324599

6.222%

5-Year ARM

6.125%

$4,206

Includes 0.784 points for $3,136

Lender Fees: $1,070

$2,431 /mo

Next >

Rate data provided by RateUpdate.com. Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes and insurance premiums. Actual payments will be greater with taxes and insurance included. Rate and product details.

When choosing a mortgage, the term of the loan is another important factor to consider. The loan term is the length of time it will take you to pay off the mortgage, and it typically ranges from 10 to 30 years. The shorter the loan term, the less interest you'll pay over time, but the monthly payments will be higher. Longer-term loans typically have lower monthly payments, but you'll end up paying more in interest over the life of the loan.

Understanding the type of mortgage you are applying for is critical, and it includes comprehending the interest rate along with the loan term. Here's an example to illustrate this further. If you borrowed $100,000 at a 3.5% interest rate, your monthly payment would be $449.04, and you would end up paying $161,656.09 over 30 years. However, if you borrowed the same amount at the same interest rate but for a 15-year term, your monthly payment would increase to $714.88, but the total cost of the loan would be $128,678.86, with less than half as much interest as you would pay by taking out a 30-year mortgage.

As you can see from this example, opting for a shorter-term loan may result in higher monthly payments but can save you a considerable amount of money in interest over the life of the loan. However, this is just a simple example and doesn't account for all the factors that can influence the cost of a mortgage, such as property taxes, closing costs, and private mortgage insurance.

If you're considering applying for a mortgage, it's important to do your research and shop around for the best mortgage rates. You can compare mortgage rates at MonitorBankRates.com, we provide up-to-date information on mortgage rates and our search table allows you to compare rates from different lenders. By understanding the different types of mortgages available and the factors that can affect their cost, you can make an informed decision and find the mortgage that best fits your needs and budget.