The Most Common Mortgage Question by Marian Garcia-Stevens with United Mortgage NMLS#239814CO#239814WA#CL-239814KS#MC-0001462MO#15-1624,NMLS#268152CO#100503962WA#267152KS#0002436MO#12621-MLO
Not sure how a mortgage works? Don’t feel bad. The average homebuyer doesn’t either. The entire process is filled with question, from how big of a down payment should be to why your interest rate isn’t as great as you had hoped. To clear up some of your confusion, here are some of the most common questions homebuyers ask about mortgages, as well as some expert answers.
Q: Do I need a 20% down payment?
A: The standard for a down-payment is 20%, but if you don’t have the cash, there are plenty of ways to put less down and still het your home. Topping the list:
Federal Housing Adminstration Loan(FHA) lets borrowers put down as 3.5%. but you will need to meet certain qualifications, including a minimum credit score of 500 and steady employment for at least 2 years.
If you are active or retired military (or a surviving spouse of a veteran) a Veteran Affairs loan allows you to put 0% down, among other benefits.
Some states offer loan programs that enable borrowers with low income to receive a down payment subsidy.
Q: Why is my mortgage’s interest rate offer higher than the one I saw advertised?
If you see a remarkably low rate, take a closer look and you will notice a disclaimer (typically an asterisk) saying the best possible rate. To grab this rate, you will need a high credit score of (750 or above) also a low loan to value ratio, (LTV) which essentially means you’re make a sizable down payment of at least 40% of the home price.
If your borrowing scenario is not that spectacular, you are considered more of a risk, and your interest rate will reflect that. In addition to your credit score and loan-to-value ratio, it will also depend on your loan size, the type of property your buying (condo, vs single-family-home) bottom line is ask questions to your licensed loan originator and read the fine print.
Q: Is a 30-year fixed-rate loan the best option?
While the 30-year loan with a fixed interest rate may be the first mortgage most home buyers think of getting “There is no one size fits all loan options” For example adjustable rate mortgages to most people has a ugly connotation to it. Arms do make sense in certain circumstances, like if you plan to move soon, before the rate adjusts. It may also make sense if you cannot afford a home with a fixed rate, since those rates are a little higher.
Q: What is private mortgage insurance, and why do I need it?
If you are using conventional non-government financing and can’t afford to make a 20% down payment, you must pay Private Mortgage Insurance (PMI) PMI kicks in if you end up unable to pay your mortgage. Since your lender losses money in this scenario, PMI pays it, the benefits offset that loss. You can expect to pay anywhere from .03 to 1.15% of your home loan amount in PMI. This can be a sizable sum, but it makes sense if you want to buy a home now rather than wait until you can arrive at the required down payment to avoid PMI.
Q: What happens if I can’t pay my mortgage?
Depending on the lender you may have a grace period to make this payment, normally its 15 days. Miss this deadline and your account becomes” delinquent” which can immediately hurt your credit score. If you know you will be missing a payment, notify your lender in advance to find out your options.
Marian Garcia-Stevens 