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A helpful first step is to use a 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 range for your home search. To use a mortgage calculator, you'll enter a few details about the loan, including: .

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.

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 - current mortgage rates. Because borrowers with better credit scores and debt-to-income ratios tend to be lower risk, they are offeredthe lowest interest rates, which can save tens of thousands of dollars over the life of the loan.

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. An example 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.

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.

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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 sporadically (for example, if you’re self-employed). Because Alt-As are viewed as somewhat risky (falling somewhere between prime and subprime), interest rates tend to be higher than those of prime mortgages but lower than subprime.

That seemingly small change in interest would cost you $62,573. Just because a lender offers you a mortgage with an Alt-A or subprime rate doesn’t mean you wouldn’t qualify for a prime-rate mortgage with a different lender. It pays to shop around. Lenders and mortgage brokers may be competitive, but they generally are under no obligation to offer you the best deal available.

Taking the time to find a better interest rate can save you tens of thousands of dollars over the course of a loan. mortgage rates trend. 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.

And as you do—or even before you do—follow the steps below. If you’re looking for a home right now, getting your finances in great shape may be tough. So try to think ahead; 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.

Even a 20-point difference in your score could move your rate up or down more than 0. 25%. On a $250,000 home, one-quarter 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. The more you can put down, the lower your mortgage payment and the less interest you’ll pay over time. zions bank mortgage interest rates.

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Coming up with a 30% down payment (vs. the conventional 20%), for example, could drop your rate by more than 0. 5%. 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.

Lenders also generally have stricter rules for verifying self-employment income. Not only will you need to provide federal tax returns for two years, you’ll also need to submit a signed statement from an accountant, a profit/loss sheet, and other documentation to show sufficient business income. Lenders care about how much debt you have in relation to 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), as well as the proposed mortgage payment, and divides the sum by your gross monthly income. In evaluating these ratios, lenders presume that the higher your DTI ratio, the more likely you are to default on your loan.