Compare Mortgages

Compare mortgages from a range of leading national mortgage lenders so you can find the best deal

Last updated by Zaving Editorial Team, on January 18th, 2024

It's vital to compare mortgages if you want to make sure that you're getting a great deal! Navigating mortgages may seem daunting, especially for first-time homebuyers. However, understanding the different types of mortgages, the application process, and what factors influence your eligibility can make the process significantly less intimidating.

This comprehensive guide delves deep into the mortgage world, empowering you with the knowledge you need to make informed decisions about your home financing. Here at zaving we're committed to offering transparent, accurate, and useful mortgage comparison information, making your home buying journey smoother and more rewarding.

What is a mortgage?

A mortgage is a type of loan that individuals or businesses can borrow to purchase a property, typically a house or a commercial building. Borrowers enter into a contractual agreement with a lender, such as a bank or a mortgage company. The lender provides a lump sum of money, which the borrower uses to buy the property. The borrower then repays the loan over a specified period, usually through monthly installments.

The lender secures the mortgage with the property itself. If the borrower fails to repay the loan, the lender has the right to foreclose on the property and take possession of it.

Mortgages consist of the principal amount borrowed and the interest charged by the lender. The borrower pays back the principal along with the interest over time. The interest rate may be fixed or adjustable, depending on market conditions.

Different mortgage terms and repayment periods are available, such as 15 years, 30 years, or longer. The terms of the mortgage agreement include details about the interest rate, payment schedule, and any additional fees.

It's important to note that while the property serves as collateral, the borrower retains the right to occupy and use the property as long as they meet their mortgage payments. Once the mortgage is fully repaid, the borrower becomes the sole owner of the property.

Overall, mortgages enable individuals and businesses to finance the purchase of real estate, making homeownership and property investments more attainable by spreading the cost over time.

What types of mortgages are available?

There are several types of mortgages available to borrowers, each with its own features and benefits. Here are some common types of mortgages:

  1. Fixed-Rate Mortgages: These mortgages come with an interest rate that stays the same for the life of the loan. This means your monthly payment will remain consistent throughout the term.
  2. Adjustable-Rate Mortgages (ARMs): Unlike fixed-rate mortgages, ARMs have interest rates that change over time. The rate is typically fixed for an initial period, after which it adjusts periodically based on a financial index.
  3. Interest-Only Mortgages: With these loans, you initially pay only the interest on the loan in monthly payments for a term that's fixed. After this period, the balance is due, or you start paying both principal and interest.
  4. FHA Loans: These are loans insured by the Federal Housing Administration (FHA). They are designed for low-to-moderate income borrowers who can't make a large down payment.
  5. VA Loans: VA loans are mortgages guaranteed by the Department of Veterans Affairs. They are offered to military service members and their families.

It's essential to think about your financial situation and goals to determine which type of mortgage is most suitable for your personal circumstances. When choosing a loan consider factors such as interest rates, loan terms, down payment requirements, and your long-term plans for the property.

How do I choose the right type of mortgage?

Choosing the right type of mortgage is an important decision that can have a significant impact on your financial well-being. Here are some steps to help you choose the right type of mortgage:

Assess your financial situation Begin by evaluating your income, expenses, and savings. Consider factors such as your monthly budget, available funds for a down payment, and your credit score.

Determine your long-term goals Think about your long-term plans for the property. Are you planning to stay in the home for a short period or for the long term? This will help you decide on the appropriate loan term and mortgage type.

Research available options Familiarize yourself with the different types of mortgages available, such as fixed-rate, adjustable-rate, government-backed loans, and conventional mortgages. Understand the features, benefits, and potential risks associated with each option.

Consider interest rates Compare interest rates from different lenders to find the most favorable option. A lower interest rate can result in lower monthly payments and save you money over the life of the loan.

Evaluate loan terms Evaluate the loan terms, including the duration of the loan. Shorter loan terms may result in higher monthly payments but can save you money on interest payments over time.

Review down payment requirements Consider the down payment required for each mortgage type. A higher down payment can lead to better loan terms and potentially avoid the need for private mortgage insurance (PMI).

Assess your creditworthiness Understand your credit score and credit history. Lenders consider credit scores when evaluating mortgage applications. Improving your credit score can help you qualify for better mortgage terms.

By following these steps and carefully considering your financial situation and long-term goals, you can make an informed decision and choose the right type of mortgage that aligns with your needs and maximizes your financial well-being.

What factors affect the interest rate on my mortgage?

The interest rate on your mortgage is influenced by several key factors that lenders take into consideration. Understanding these factors can help you better comprehend why interest rates vary and how they can impact your mortgage. Here are the main factors that affect the interest rate on your mortgage:

1. Credit Score Your credit score plays a significant role in determining the interest rate you will be offered. Lenders use credit scores to assess your creditworthiness and evaluate the risk associated with lending to you. Generally, borrowers with higher credit scores are offered lower interest rates.

2. Loan Term The term of your loan, or the length of time you have to repay the mortgage, can affect the interest rate. Typically, shorter-term loans, such as 15-year mortgages, come with lower interest rates compared to longer-term loans, such as 30-year mortgages.

3. Loan Amount The amount you borrow can impact the interest rate. Higher loan amounts may result in higher interest rates, as lenders perceive larger loans to be riskier.

4. Down Payment The size of your down payment can influence the interest rate on your mortgage. A larger down payment often leads to a lower interest rate, as it indicates a lower loan-to-value ratio and reduced risk for the lender.

5. Loan Type Different types of mortgages, such as fixed-rate mortgages and adjustable-rate mortgages (ARMs), can have varying interest rates. Fixed-rate mortgages offer a stable interest rate throughout the loan term, while ARMs typically have lower initial rates that can adjust over time.

6. Market Conditions Interest rates are influenced by broader economic factors and market conditions. Factors such as inflation, the overall state of the economy, and monetary policy decisions by the Federal Reserve can impact mortgage rates.

7. Lender's Policies Each lender sets its own policies and criteria for determining interest rates. Lenders may consider additional factors such as their cost of funds, operational expenses, and desired profit margins when setting interest rates.

It's essential to remember that these factors interact with one another, and their combined influence determines the interest rate you will be offered. By understanding these factors, you can take steps to improve your credit score, save for a larger down payment, and choose the right loan term and type to potentially secure a more favorable interest rate on your mortgage.

What factors should I consider when choosing a mortgage?

Choosing the right mortgage is crucial for your financial goals and long-term satisfaction. Consider these key factors:

Interest rates: Compare rates from different lenders to find the most favorable option for your monthly payments and overall cost.

Loan terms: Evaluate the length of the loan, such as 15, 20, or 30 years, and decide on a term that aligns with your financial needs.

Loan type: Determine whether a fixed-rate or adjustable-rate mortgage suits your financial situation and risk tolerance.

Down payment: Decide on the amount you can afford to put down upfront to lower your monthly payments and potentially avoid private mortgage insurance (PMI).

Closing costs: Evaluate the associated costs, such as origination fees and title insurance, and factor them into your budget.

Mortgage programs: Explore government-backed loans and programs for first-time homebuyers that offer more flexible terms and lower down payment requirements.

Flexibility and prepayment: Assess the mortgage's flexibility, including options for prepayment and refinancing to save money in the long run.

Lender reputation: Research and choose a reputable lender known for excellent customer service and competitive rates.

By considering these factors, you can make an informed decision that aligns with your financial goals and ensures a secure and satisfying homeownership experience.

Tips for a successful mortgage application

Securing a mortgage requires careful preparation and attention to detail. Consider these essential tips to strengthen your mortgage application:

  • Strengthen your credit score: Pay your bills on time, reduce credit card balances, and avoid new debt to improve your creditworthiness.
  • Save for a down payment: Aim for a down payment of 20% or more to demonstrate financial stability and potentially qualify for better terms.
  • Maintain stable employment: Lenders prefer borrowers with a consistent employment history, so strive for job stability during the application process.
  • Manage your debt-to-income ratio: Minimize debt obligations and increase your income to keep your debt-to-income ratio in check.
  • Get pre-approved: Obtain a pre-approval letter from a reputable lender to show sellers that you're a serious buyer.
  • Gather required documentation: Prepare necessary documentation, including proof of income, bank statements, and tax returns, to expedite the application process.
  • Avoid major purchases or new debt: Hold off on significant purchases or new debt before or during the application process to maintain your financial stability.

By following these tips, you can enhance your chances of a successful mortgage application, securing favorable terms and achieving your homeownership goals.

What are the pros and cons of fixed-rate mortgages versus adjustable-rate mortgages?

When choosing a mortgage, it's important to understand the pros and cons of fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). Each option has its own advantages and considerations. Here's a breakdown of the pros and cons of both types:

Fixed-Rate Mortgages (FRMs):

Pros:

  1. Rate Stability: With FRMs, the interest rate remains constant throughout the loan term, providing predictable monthly payments. This stability makes budgeting easier and protects against potential rate increases.
  2. Long-Term Planning: FRMs are ideal for those who plan to stay in their homes for an extended period. You can lock in a favorable rate for the entire loan term, ensuring consistent payments.
  3. Protection Against Market Fluctuations: If interest rates rise, your fixed rate remains unchanged, offering protection against increasing mortgage costs. This stability can provide peace of mind, especially during uncertain economic times.

Cons:

  1. Potentially Higher Initial Rates: FRMs often have slightly higher interest rates compared to ARMs. This higher rate may result in larger monthly payments initially.
  2. Limited Flexibility: Once you secure a fixed rate, you're locked into it for the loan term unless you refinance. This lack of flexibility can be a disadvantage if rates drop significantly.

Adjustable-Rate Mortgages (ARMs):

Pros:

  1. Lower Initial Rates: ARMs typically offer lower initial interest rates than FRMs. This can result in lower monthly payments during the initial fixed-rate period.
  2. Flexibility: ARMs often provide an initial fixed-rate period, typically 3, 5, 7, or 10 years. After this period, the rate adjusts based on market conditions. If you plan to sell or refinance before the adjustment period, an ARM can offer short-term cost savings.

Cons:

  1. Rate Volatility: After the initial fixed-rate period, the interest rate on an ARM can fluctuate periodically. This uncertainty means your monthly payments can increase if rates rise, potentially causing financial strain.
  2. Budgeting Challenges: Because ARMs have variable rates, it can be more challenging to budget for future payments. Rate adjustments can lead to unpredictable payment amounts, making financial planning more complex.

What is pre-approval for a mortgage, and why is it important?

Mortgage pre-approval is an essential step in the home buying process that provides you with a clear picture of how much you can borrow from a lender. It involves submitting your financial information and undergoing a preliminary evaluation to determine the loan amount for which you qualify. Here's why mortgage pre-approval is important:

1. Clear budget and confidence

Obtaining a mortgage pre-approval helps you establish a clear budget for your home search. With a pre-approval, you'll know the maximum loan amount you can secure, enabling you to focus your search on homes within your price range. It provides confidence and peace of mind, knowing that you're looking at properties you can afford.

2. Competitive advantage

In a competitive real estate market, sellers often prioritize offers from buyers who have pre-approval letters. Pre-approval demonstrates to sellers that you are a serious and credible buyer, increasing your chances of having your offer accepted over others who have not yet gone through the pre-approval process.

3. Faster closing process

Since you have already completed much of the initial paperwork during the pre-approval process, the subsequent mortgage approval and closing processes may be expedited. This can help streamline the overall timeline and make the closing process faster and smoother.

4. Rate lock opportunity

During the pre-approval stage, some lenders may offer the option to lock in an interest rate for a certain period. This can protect you from potential rate increases while you continue your home search or wait for the right opportunity to make an offer.

5. Increased negotiating power

Having a pre-approval in hand gives you increased negotiating power when it comes to making an offer on a property. Sellers are more likely to take your offer seriously when they see that you have already taken the necessary steps to secure financing.

Why is pre-approval important?

Mortgage pre-approval is important because it provides you with a clear budget, competitive advantage, faster closing process, rate lock opportunity, increased negotiating power, and the opportunity to identify and address potential issues. By obtaining pre-approval, you can confidently navigate the homebuying process and make informed decisions along the way.

Got further questions about business loans?

Can I get a mortgage with a low down payment?

Yes, it is possible to get a mortgage with a low down payment. Several loan programs, such as FHA loans, offer options for down payments as low as 3.5% of the purchase price. However, keep in mind that a low down payment may result in higher monthly payments or the need for private mortgage insurance (PMI).

What are closing costs and how much should I expect to pay?

Closing costs are fees associated with the mortgage closing process. They typically include loan origination fees, appraisal fees, title insurance, and more. On average, closing costs can range from 2% to 5% of the loan amount. However, the actual amount can vary based on factors such as the loan type, property location, and lender fees.

What is private mortgage insurance (PMI) and do I need it?

Private Mortgage Insurance (PMI) is insurance that protects the lender in case the borrower defaults on the loan. It is typically required for conventional loans with a down payment of less than 20% of the purchase price. PMI can increase the monthly mortgage payment. However, once you reach 20% equity in your home, you can request to cancel PMI.

What are the key differences between buying a home and refinancing a mortgage?

Buying a home involves obtaining a mortgage to finance the purchase of a property. Refinancing, on the other hand, is the process of replacing an existing mortgage with a new one, often to secure better terms or lower interest rates. While both involve mortgages, the key difference is that buying a home is for initial property acquisition, whereas refinancing is for modifying an existing mortgage.

What is a good credit score for getting a mortgage?

A good credit score for a mortgage is typically around 700 or higher. However, lenders have varying criteria, and lower credit scores may still qualify for certain loan programs with higher interest rates or stricter requirements.

How long does it take to get approved for a mortgage?

The mortgage approval process can take anywhere from a few weeks to a couple of months. The timeline depends on factors such as the lender's workload, documentation requirements, and the complexity of your financial situation.

What is a mortgage prepayment penalty?

A mortgage prepayment penalty is a fee charged by some lenders if you pay off your mortgage early or make substantial additional payments. It's important to review your loan terms to determine if a prepayment penalty applies.

What is escrow and how does it work?

Escrow refers to a neutral third party that holds funds and important documents during the home buying process. They ensure that all conditions are met before the transaction is completed, including the transfer of funds and title.

What Is an amortization schedule?

An amortization schedule is a table that details each mortgage payment, including the breakdown of principal and interest. It shows how the loan balance decreases over time until it is fully paid off.

What is a loan estimate?

A Loan Estimate is a document provided by the lender that outlines the estimated costs associated with the mortgage, including interest rates, monthly payments, closing costs, and other fees. It helps borrowers compare loan offers from different lenders.

Can I pay off my mortgage early?

Yes, you can pay off your mortgage early by making additional principal payments. However, it's important to review your loan terms to ensure there are no prepayment penalties. Paying off your mortgage early can save you interest payments over the long term.

What happens if I miss a mortgage payment?

If you miss a mortgage payment, contact your lender immediately to discuss the situation. Late payments can negatively impact your credit score and may incur late fees. It's essential to communicate with your lender to explore options and avoid further complications.