- What Types Of Mortgages Does Your Lender Offer?
Most mortgage company offer a wide array of loan options to fit various situations. Two most common loan types are fixed-rate and adjustable-rate mortgages (ARMs).
Fixed-rate mortgages interest rates and principal payment remain the same for the life of the loan. Since the interest never changes during the life of the loan, the borrower can always budget for the mortgage payment. Keep in mind that Insurance and Taxes are adjusted annually and the borrower escrow may see a slight adjustment in their mortgage payments due to these annual adjustments. A fixed rate mortgage is the best option especially if the borrower is planning to stay in the home for 5 years or longer.
The ARMs are interest rates and payments adjusted up or down as the market index changes. The rate usually is adjusted between three months to five years. ARMs are usually protected by caps that limit how much the interest rate is adjusted up the first time and thereon. This option is good if you are getting a mortgage at a time when rates are high or if you are planning to sell before the first adjustment period.
1. What Is the Interest and Annual Percentage Rate (APR)?
The interest rate used to calculate your total cost over the life of the loan and the amount of your monthly payment. (The higher your interest rate the more your monthly payment will be. The APR is comes from the calculation that includes the interest rate and all the other related lender fees divided by the loan term.
3. What Are the Discount Points and Origination fees?
Each point equals 1% of the loan amount. Therefore 1 point on a $400,000 loan cost $ 4,000. Points are a way to buy down the interest rate. The more points you pay the lower your interest rate will be. Lenders may have some restrictions on points buy down. Points are tax deductible, no matter who pays for them. The longer you plan to stay in the home the more it is worth to pay for discount points.
4. What Are The Closing Costs?
Closing costs are fees included in your loan, usually includes charges for credit reports, deed search and more. Your lender is required by law to provide a good faith estimate of your loan's closing costs within three days of receiving your application. Your mortgage consultant should explain the purpose of all the fees to you and your Real Estate Professional and try to have the seller to pay some of these closing costs on your behalf.
5. What Are Rate Locks and When Can You Take Advantage Of Them?
Interest rates fluctuate daily. Think about locking in the interest rate if interest rates are rising. Locking in interest rate are usually good for 30 to 45 days while you search for the right home. Lock in the interest rate on your application not a approval. So if the rate goes up between the time you applied and the time you are approved you will not have to pay the higher rate.
6. What Is The Minimum Required Down Payment?
The down payment determines the loan's rate and term. The minimum down payment is the lowest amount of money you can put down on your home, this is a percentage of the property's value. Required down payment usually range from 3%-20%. A 3% down payment requires 97% financing, with a 5% down payment 95% will be financed. The larger the down payment the lower the principal and monthly payments. Larger down payments usually enables you to obtain a lower interest rate. Down payments less that 20% requires you to have mortgage insurance (PMI).
7. Is There A Prepayment Penalty?
Sometimes if you pay off your mortgage early you could be charge a prepayment penalty. The penalties usually are as much as 3% of the loan balance or the equivalent of six month's interest. Often prepayment penalties decline or disappear over time. Sometimes you may be able to secure a better interest rate if you agree to a prepayment loan. You may want to think twice before you agree to a loan with a prepayment penalty. Most borrowers do not stay in the home for the life of the loan. They usually refinance or sell the home.
8. How Long Will It Take To Close My Loan?
Closing time may vary from 2-6 weeks depending on how long it takes to prepare and process your documentation. Try to submit your application in advance to insure funding for your loan. Talk to your real estate agent, allow the maximum time for closing when you find the home you want to purchase. This will give your loan processor more time to work on your loan. If the loan processor is done before the maximum time ask your agent to request a change of closing date so you can close earlier.
9. What Might Delay My Loan Application?
Avoid potential delays by making sure your application is accurate, complete and legible. Provide all the supporting documentation needed in order for your loan processor to have all the necessary information to proceed with the processing of your loan.
10. What Documentation Do I Need?
Some of the documentation that you need are names and contact information from your current employer, proof of income, social security, bank statements and any assets you may have. Your loan officer should provide you with a check list of all documentation you will need in order for the loan to be processed.
MEDINA J. KERTON IS A GEORGIA LICENSED REALTOR WITH CENTURY 21 PLATINUM REALTY IN THE METRO ATLANTA AREAS, REPRESENTING HOMEBUYERS, SELLERS AND INVESTORS. CALL ME TODAY FOR ALL OF YOUR REAL ESTATE NEEDS!
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