What is a mortgage?
Mortgages are loans that a mortgage lender or bank gives to help finance a home. Typically homes loans are for 80% of the home’s value or less. There are four parts of a mortgage payment: principal, interest, taxes and insurance.
• Principal- the amount of money you borrowed to finance the home
• Interest- the money paid regularly at a particular rate for the use of the loan
• Taxes- property taxes you pay as a homeowner. Calculated based on the value of your home
• Mortgage Insurance- If your down payment is less than 20% you will have to pay mortgage insurance. This protects the lender incase you default on your loan.
What’s a good credit score?
Credit scores are important because they measure how well and on time you pay off credit that was lent to you. Typically the higher a score you have the lower your interest rate will be.
Excellent credit- 720 and above
Good credit- 660 to 719
Fair credit- 620 to 659
Poor/bad credit- 619 and below
What kind of mortgage is the best?
This depends on what your plans are for the home you are purchasing. See the different kinds of mortgages below.
Fixed-rate mortgages- gets paid off over a set amount of time and at a specific interest rate. A 30-year fixed is the most common example. As market rates rise and fall, your interest rate will remain the same.
Adjustable-rate mortgages (ARMs)- gets a lower initial interest rate compared to a fixed-rate mortgage but it won’t remain there. Interest rates fluctuate with an indexed rate plus a set margin. This is best if you aren’t planning on staying in your home for long, or if you plan to refinance.
Federal Housing Administration (FHA) loans- FHA loans are mortgages insured by the
Federal Housing Administration. They are designed for borrowers who can’t come up with a large down payment or have poor credit. This is a popular choice for first-time homebuyers.
Veterans Administration (VA) loans- is a zero-down loan offered to qualifying veterans, active military and military families. In most cases, no down payment is required and you will not have to pay mortgage insurance. If you qualify for a VA loan this is most likely the best choice.
USDA loans – USDA loans are backed by the United States Department of Agriculture (USDA) and are designed to help low- or moderate-income people buy, repair or renovate a house in rural areas (some suburban areas qualify). Typically these loans require no down payment and get below-market mortgage rates.
Conforming loan- is any home loan that follows Fannie Mae and Freddie Mac’s conforming guidelines; guidelines include credit, income, assets requirements and loan amount.
Jumbo loans- is referred to as non-conforming mortgages. This is a good option if you are purchasing a higher-priced home. These loans have flexibility that conforming loans don’t have, such as not requiring mortgage insurance when the down payment is less than 20 percent. Although, interest rates will be higher and they often require higher down payments and excellent credit.
How do I choose a mortgage lender?
Your Signature Premier Properties real estate agent can point you in the right direction. Don’t have one? Call us today to be paired with a real estate agent that can meet all your needs. 877.273.3750