Mortgage Information for Home Buyers

Deciding which mortgage program is the best for you can be a confusing process. But today, there are so many loan programs available, you can practically customize a loan to suit your needs. Understanding a few key terms will help you decide which program is best for you.

Before you start looking for a home, get pre-qualified for a loan. Banks, credit unions and mortgage bankers make home loans; mortgage brokers process them. Mortgage brokers often have a wider variety of loans and programs available to them than banks or mortgage bankers. The lenders will take an application, process the loan documents, and see the loan through to the funding stage.

It is a good idea to speak with several brokers or bankers to insure that you are getting the best mortgage for your needs at the best rate. you also want to make sure you are dealing with a reputable company.

If you have marginal or bad credit, consult your lender. You may be able to qualify for a loan depending on how long ago and what reason(s) caused the bad credit. A lender should be able to advise you on whether your credit history will prevent you from qualifying for a home loan.

You will probably need a down payment. Down payment requirements vary depending on the type of loan.
100% and higher loans are available, but may have higher interest rates. Consult with a lender about programs available in your area.

You will need funds for closing costs. Closing costs are charges for services related to the closing of
your real estate transaction. They include: escrow fees charged by the company handling the transaction, title policy issuance fees charged by the title insurance company, mortgage insurance fees, fire and homeowners insurance, county recorder fees for recording your deed, loan origination fees. Your lender will give you a good faith estimate for these costs, as well as information about loan programs which can assist in financing your closing costs

Some loans have "points" and some do not. A point is a loan origination fee equivalent to 1% of the loan amount. Together with the interest rate they constitute the yield on your loan for the lender. Some lenders charge a higher interest rate to compensate for charging no points. It is important to comparison
shop lenders to make sure your loan is at a competitive yield.

Should you select a mortgage with a fixed rate or an adjustable rate? The answer to this question depends on whether mortgage rates are at a high or a low point when you purchase, and on how long you plan to live in the home. If rates are high, an adjustable rate might be attractive since subsequent rate drops could reduce your monthly payments. Additionally, lenders may offer a below-market rate during the first few years of an adjustable mortgage to make it appealing to you. If interest rates are low you might want to take a fixed rate to protect yourself against the possibility of rising interest rates.

There are two different loan catagories:
Conventional Loans.
Conventional mortgage loans are available with fixed or adjustable interest rates. Some loans may require mortgage insurance.

Government Loans.
These include Federal Housing Administration (FHA) fixed and adjustable rate mortgage loans,
and Veterans Administration (VA) fixed rate mortgage loan.

If you are a low or moderate income home buyer, there are special programs designed to help you. These loans are available through private lenders, as well as local and state housing agencies. Most lenders specializing in real estate mortgage loans are aware of these types of loan programs.

You might qualify for a No-income Check mortgage. If you have good credit and a small down payment, you may qualify for one of these loans. You can state your income to the bank and thus avoid having to provide pay stubs and W-2s. Often these loans have higher interest rates, however.

Why might I have to pay mortgage insurance? Mortgage insurance protects the lender from potential loss if you should default on your mortgage loan payment. Generally, conventional loans that require larger down payments do not require mortgage insurance. Mortgage insurance is always required on FHA mortgage loans.

There are many programs available today which can help solve a variety of problems. For example, Piggyback loans may be available to help those with a low down payment avoid having to pay private mortgage insurance, or PMI. Building or improvement loans may also be possible to help a new buyer do necessary renovations in their new purchase. As previously mentioned, 100% financing or higher may also be available.

So don't feel overwhelmed at the thought of getting a mortgage. With a little research, you can be an expert too. Make sure to get quotes from several lenders and don't be afraid to ask questions. You may find that you can qualify for more than you think!