Frequently Asked Questions
What will my mortgage payments include?
Your mortgage payment usually consists of two parts. The
principal is the amount of money you are paying towards the
amount borrowed. The interest is the amount of money you are
paying to borrow the money. In the beginning of your
mortgage you will pay more to interest and less to principal
and as your mortgage progresses you will see a shift where
more of the money is going to principal and less to
interest.
What is a fixed rate mortgage?
With this type of mortgage your interest rate will remain
fixed for the entire life of the loan. This type of loan
will provide you with the same payment amount every month
until the loan is paid off
What is an adjustable rate mortgage?
An adjustable rate mortgage is a loan in which the interest
rate can move either up or down over the life of the loan.
With this type of mortgage the interest rate will generally
start low and increase the longer you have the loan.
What is a home equity loan?
A home equity loan is a loan that allows you to borrow a
large amount of money, using your home as collateral. Your
home equity loan will be a set amount of money at a fixed
interest rate. It is a great option when you need a large
amount of money for home improvement, debt consolidation or
other major expenses.
When is refinancing a good option?
There are a number of reasons why someone would refinance.
You can refinance if the interest rate has gone down, which
will lower your monthly payment. Some people refinance when
they have built equity in their home and would like to take
some of that money out. Many people also refinance their
loan when the initial period of their adjustable rate
mortgage is coming to an end and they want to switch to a
fixed rate mortgage.
Do I need to appraise my home if I am refinancing?
Yes, essentially refinancing is paying off your mortgage
with a new mortgage. Especially if you are changing lenders,
they want to make sure the property they are funding is
worth the cost that is being mortgaged.
How much are closing costs?
Closing costs will vary based on several factors including
the lender, the type of mortgage, the purchase contract, and
the state you live in. Your lender will charge fees for
appraisal and credit reports. If you are paying for points,
those will also be charged at closing. There are also fees
for title insurance and hazard insurance and deposits for an
escrow account. A lender can give you the approximate
closing costs of your mortgage with a quote so that you can
compare lenders.
What is amortization?
Amortization is the period it would take you to pay off your
mortgage in full. As long as you maintain the same terms and
payment periods of your loan your amortization period will
be whatever the term of your mortgage was when it was first
taken out.
What is Private Mortgage Insurance and will I have to pay
it?
Private Mortgage Insurance (PMI) provides your lender with a
way to recoup its investment if you are unable to repay your
loan. PMI is usually required when the mortgage amount is
higher than 80% of the home’s value. That means that if you
buy a home with a down payment of less than 20%, you will
probably have to pay PMI. Many people get around this by
using an 80/20 program, which combines a first mortgage with
home equity financing.
What if I have bad credit?
Your credit history is only one factor that a lender will
look at. While someone with good credit will have more
options available to them it doesn't’t mean someone with bad
credit cannot qualify for a loan. In fact, there are several
mortgage programs specifically designed for people with bad
credit. |