The process of getting a mortgage is not only mentally taxing but can be very emotional as well. You want to cover all your bases but you’re committing to a property and a loan that you have to live with for some time. We are here to make your journey easier. You are welcome to learn at your convenience from all of our online reading materials but don’t forget that we are available to answer any question that you have about your mortgage search. You can reach us anytime at Contact Us.
We’ve put together this collection of online articles to help explain everything from the basics to some interesting and advanced topics.
The Anatomy of a Mortgage
A mortgage payment consists of PITI
P – Principal – The original amount of the money borrowed from a lender.
I – Interest – A fee charged for borrowing money.
T – Taxes – Property taxes paid to your local government.
I – Insurance – Home owners insurance on your property.
Fixed – Fixed mortgages have a fixed term (like 15 or 30 years) and a fixed interest rate. The interest rate and term are fixed over the course of the mortgage and your monthly payment for the payment of principal and interest will not change during the term of the mortgage. Taxes and insurance can change so this may affect your total payment during the life of your loan.
Adjustable – An ARM (Adjustable Rate Mortgage) has an interest rate that will be adjusted up or down according to current interest rate levels. The monthly amount for your principal and interest payment will go up or down based on these interest rate changes.
The Down Payment
Many people believe that they need to put down 10 percent or even 20 percent for their down payment and that’s no longer true. There are many lenders that have loan programs that require 5 percent or less, including zero down. Way back when, the only zero down loans were from the Veterans Administration but fortunately those days are gone. If you think that you have to pay rent until you save up a 10 or 20 percent down payment, check with us. You’ll be pleasantly surprised.
You will want to get pre-qualified during your mortgage search. Prequalification isn’t binding but rather it gives you a ballpark idea of what you can afford. The lender analyzes your income, debt and credit history to estimate your maximum loan amount. Combine that with the money you have for a down payment and you have your maximum home price.
The next step is preapproval which verifies your income, debt and credit. Preapproval gives you the following benefits:
- Knowing exactly what you can borrow. You will have an accurate commitment from your lender for the amount you can borrow.
- Credit problem solving. You will know now, instead of while your offer is being evaluated by the buyer if you have any credit issues to be dealt with.
- Stronger negotiating position. Sellers love pre approved buyers. They know your offer will not fall through and will treat you like the proverbial bird in the hand. This can help you negotiate a better price.