how are interest rates calculated for a home loan?

Answer 1

I have a straight forward answer. You can go to bankrate.com and type in your loan amount, Interest rate, Term (how many years) and calculate payment. That will give you Principal and Interest. Or you can purchase a $34.00 calcluator ( a good one is a HP10B2) and look for these values PV=Present Value, I/Y= Interest over the years, N = months or term, PMT= Payment. You punch in the loan amount then press PV, then the interest rate; press I/Y after, then 360 months for 30 years; press N. After that, press PMT and that will give you the payment for Principal and Interest. If you want to find out the Taxes and Insurance, you calculate 1.25% (for California residences. See your state tax percentage) and divide that by 12 and do the same for your hazard insurance. This will give you a full mortgage payment of Principal, Interest, Taxes and Insurance. We call this PITI. If you stay in California, you can reach me at www.avemr.com

Answer 2

calculated? Well your credit score is comprised from you credit history and ability to pay loans. Banks or lenders will use that score to decide how safe of a borrower you are. IF you have a high score that means you have paid your loans on time and show a strong ability to pay loans in the future, making you a safe borrower, therefor earning a lower interest rate. Banks will charge a higher interest rate if you don't have a good score and are more at risk to not paying the loan back.

To determine your monthly payment from you loan amount, interest rate and how long the loan will last you use the following formula.
i = interest rate (6%) = .06
n= number of terms (12 terms in one year) 30 yrs n=12*30 =360
P=loan value

payment =
P ((i/12)(1+(i/12))^n)/
(((1+(i/12))^n)-1)

if you look up 'pmt' in the excel help menu, there is a function for it too.