Understanding how your mortgage payment is calculated will help you know just what you can afford to pay each month.

Your mortgage payment is affected by many factors. In this chapter, we'll show how your credit score is considered by lenders and what you can do to improve it before you shop for a mortgage. (Use this mortgage calculator to see how much you will pay.) The amount you put down on your home will affect other aspects of your mortgage, but there are programs for you even if you have a small down payment. We also discuss private mortgage insurance and points -- which also affect your mortgage payments.

What you can expect to learn from this chapter:

Your credit score   Your credit report and score are a major consideration for lenders. Here's how you can improve yours before you shop for a mortgage. Down payment   The size of your down payment is the first step. Bankrate's calculator "How much house can you afford?" will help you figure that out. Low down payments   If you can make only a small down payment, don't despair: VA and FHA loans, as well as other programs, may help you get your mortgage. Mortgage insurance   You must obtain private mortgage insurance if you put down less than 20 percent of your purchase price. Here's what PMI is all about. Points   Discount points and origination points: how these upfront payments can affect your monthly payment. How lenders set rates   Who are Fannie Mae and Freddie Mac -- and how do they determine the mortgage rates? Chapter 3 quiz   Test your knowledge of mortgages with these questions.