Rate Calculator vs Payment Calculator
I recently searched for an online rate calculator for mortgage interest rates. All of the top results pointed to payment calculators instead of a rate calculator. This seems strange because I use a rate calculator every day.
In order to accurately compute a mortgage payment we need an accurate interest rate. This is particularly important when trying to estimate a payment on a conventional loan because the interest rates are tiered. The tiers are so complicated one needs a calculator. Here is a link will shed light on mortgage interest rate tiers.
For the most part the public believes mortgage lenders have only one interest rate, and I base this statement on my last thousand rate calls. Every single person asked for my best interest rate not for the rate they would receive. There is no way to tell if every one of them thought they should receive the best rate or just assumed there was only one rate.
My interest rate calculator is proprietary software that I use daily. It is the only method I know to quickly calculate an exact interest rate.
There is a sequence that should be followed to reach an accurate estimate. It begins with the individual’s credit score from a tri-merged credit report. When I receive an initial call from a home buyer one of my standard questions is if they know their credit score. Nine times out of ten their true credit score is 20 to 40 points below their answer. The free credit scores available online are not from a tri-merged credit report.
Using an online mortgage payment calculator without access to an interest rate calculator is dangerous. The results could easily be off 30% to 40%. The only safe way is to have an experienced loan officer guide you through the process.