Probably one of the reasons that buying a home is such an emotional experience is because of the fact that not only do you have the actual house buying to deal with, but for most home buyers you also have the mortgage process to encounter. This can be a smooth and almost uneventful process, or an unnerving one. A great deal depends on the preparation of the buyer as well as the selection of an efficient mortgage company.
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General Mortgage Information
What a Mortgage Payment Consists of
1) Principal: The repayment of the original amount borrowed on a monthly basis.
2) Interest: The cost of borrowing the principal amount, repaid on a monthly basis.
3) Taxes: Real Estate taxes paid to a local government agency.
4) Insurance: Homeowners insurance on the home. Also any mortgage insurance, which is paid to protect the mortgage company.
The total of these items is known as the PITI (Principal/Interest/Taxes/Insurance) payment.
Types of Mortgages
Fixed: A fixed term (for example, 15 or 30 years) as well as a fixed interest rate. The interest rate and term are fixed at the start of the mortgage. The monthly amount for the payment of principal and interest will not change during the term of the mortgage.
Adjustable: Often referred to as an ARM (Adjustable Rate Mortgage). The interest rate on your mortgage 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 with these rate changes. These mortgages may include “Interest Only” type of loans.
See more discussion on this subject on the Choosing a Mortgage page.
See our new article on Changes in the Mortgage Market.
How much down payment?
One of the first questions that home buyers ask is “how much down payment are we going to need?” Unfortunately, there is no standard answer. Down payments will vary from 0% (with a VA–Veteran’s Administration loan) to upwards of 25% (with certain “non-conforming” loans). As an average, most home buyers make down payments in the 5%-15% range, although your own personal situation may dictate more or less down payment. When you are factoring money for a downpayment, don’t forget about closing costs, which will total in the 2-5% range, payable in cash at the time of closing.
What is Pre qualification? Does it mean that the loan is approved?
Prequalification is the initial step in securing a mortgage. A lender will analyze your current income, debt and basic credit history situation in order to qualify you for a maximum loan amount. This gives you a clear picture of your financial parameters and a maximum housing price (the mortgage amount plus your down payment). With preapproval, the lender verifies your income, debt and financial picture, approving the loan subject to a favorable appraisal of the property you select. See the discussion on mortgage prequalification and preapproval for more information. Looking for a source for pre approval? Try Lending Tree Mortgage Loans(see information in the next section).
Finding a Mortgage
We have found a simple way to compare mortgage sources and offers. Lending Tree Mortgage Loans allows you to submit your information and will, within 2 business days, respond with up to 4 loan offers.
These are real offers–not leads or come ones. Best of all, the service is free. You can do a loan request online in minutes, and if you need to return to add additional information, you can continue where you left off. There may be a simpler way of doing things, but we don’t know what it is! If you would like more mortgage information including tips and additional calculators, visit Lending Tree Mortgage Loans, available throughout the United States.
Mortgage Glossary and Additional Information
If you want additional information on “Mortgage Speak”, see our Mortgage Glossary for definitions of the most common mortgage terms like mortgage rates or points. If you want an excellent overview and game plan for getting the best deal on a mortgage, get hold of Randy Johnson’s best selling book How to Save Thousands of Dollars on Your Home Mortgage available at bookstores or here. Whether you know nothing, a little or a great deal about mortgages, this book will most likely save you money. We have reviewed it extensively and highly recommend it.
There are options for those who have had credit problems and still want to own a home. See the section devoted to that topic.
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