September 23rd, 2009 by ewwink

Simply put, a mortgage rate is the interest rate on a mortgage loan. It is a standard variable-interest rate that is used by mortgage lenders. Prevailing mortgage interest rates are dictated by the market and are ultimately tied to long-term treasury yields. A treasury yield is the relationship to a loans interest rate and time of maturity in today’s current currency. Your mortgage rate amount will vary depending on a wide range of factors, including market conditions, your own credit history and risk factors, the loan size and payback period. The amount will also depend on the type of mortgage you select.

The first step in financing your home is figuring out how much money you need to borrow. By building a mortgage calculator, you can have a reliable estimate before seeking financing. While there is a wide variety of free online software packages that will help you build a calculator, you can do it yourself as well. You can then calculate your monthly mortgage payment using the Payment function in Excel. Using a blank cell, type “=PMT”, then in parenthesis put the Rate figure, followed by the Number of Payments figure, followed by the Mortgage Amount figure. Close the parenthesis, and then press enter. The formula should look like this: =PMT (Rate, Number of Payments, Mortgage Amount). This will tell you how much you’ll be paying monthly to finance your home. Down payments vary by transaction, but the general rule is that the larger the down payment, the easier it can be to get a loan. Most lenders prefer at least 20 percent down and require at least 5 to 10 percent down.

Getting for a mortgage prequalification means that a lender has reviewed your financial picture and believes that you are a good candidate for a loan. Though this is not a guarantee that you will be given a mortgage loan, it provides a good indication that you are in the financial position to buy a particular property. Mortgage prequalification is not a terribly complicated process and can help expedite matters when you find the home of your dreams. Once you’ve decided to get prequalified, it’s time to find a lender or mortgage broker to run the numbers. It’s always helpful to get a referral from a friend or family member. The Internet is also a good source of independent opinions on a wide variety of mortgage professionals.