Make Informed Home-Buying Decisions With Our Mortgage Loan Calculator

Tools & Calculators

Home ownership has been a big part of the American Dream for decades, if not centuries. Fulfilling a dream often comes at a cost, though, and the cost of home ownership is usually a mortgage loan of some amount. To ensure that your dream doesn't turn into a nightmare of unpayable debt, be sure to use our Mortgage Loan Calculator to help you determine how large a mortgage you can reasonably afford.

For the vast majority of us, a house is typically the largest single purchase we'll ever make in our lives, which means that a mortgage will be the largest line of credit that we'll ever apply for. Banks and other lending institutions know this, so they'll make every effort to measure the risk that you won't pay back the mortgage loan.

One of the main measuring sticks — if not the main measuring stick — that lenders use to determine your risk of defaulting on a mortgage are credit scores, those three-digit numbers calculated by three credit bureaus (TransUnion, Experian, and Equifax) according to their own secret formulas.

Each bureau receives information about your credit history (although not necessarily the exact same information) from a variety of creditors, including credit card companies, retailers with whom you have store accounts, loan originators, utility companies, and others. They enter this information into your credit reports and then use that information to generate your three credit scores (a different one from each bureau).

Mortgage lenders use these scores to assess your history of paying loans and other lines of credit in a timely manner, and also to predict your odds of ultimately paying off your mortgage loan. The higher your score is, the lower your risk of default is — and the better your chances are of getting an affordable interest rate. As a result, good credit scores can save you tens of thousands — or hundreds of thousands — of dollars on mortgage interest payments.

Unfortunately, there are no hard-and-fast rules to tell you which credit scores will qualify for which specific interest rates, since loan interest rates can fluctuate with even the slightest change in the national economy. Therefore, a mortgage loan calculator will only show you how much your monthly payments would be at specific interest rates — it doesn't guarantee you a specific rate.

However, with a little Internet sleuthing, you can usually find a general range of current mortgage interest rates according to credit scores. As long as you know your current credit scores, you can find fairly accurate interest-rate ranges. You can then enter this information into our Mortgage Loan Calculator to estimate what your monthly mortgage payments would be for different loan amounts at various interest rates.

Such estimates should be a critical part of your home-buying process, because it's crucial that you make an informed decision about the type of house you can afford. Not only will your credit scores determine the terms of your mortgage, but your credit scores going forward will be based, in good part, on your ability to pay off your mortgage in a timely fashion. Maintaining or achieving high credit scores could help you refinance your mortgage or obtain other loans down the road at favorable rates. Low scores, on the other hand, could cost you thousands of dollars in higher interest payments on other loans and lines of credit in the future.

Be sure to use our Mortgage Loan Calculator in your quest to achieve the American Dream. Best of luck with your house-hunting efforts.


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