Mortgage Basics

Mortgage Basics

 

1. Mortgage Approval:

Qualifying for a mortgage requires meeting a  set of guidelines, which will  include credit history, income, employment and assets.

Additionally, the property must also meet certain guidelines.  That is why there are home inspections, appraisals and questionaires for condominiums among other things.

2. Mortgage Payments

On a 30 or 15 years fixed rate mortgage program, the payment is divided into two parts, principal and interest.  Not including taxes, homeowners insurance, mortgage insurance or HOA dues.

The amount paid in interest decreases each month, as the amount paid towards the principal balance increases. This apportioning is referred to as amortization.  Your mortgage professional should be able to provide you with an amortization schedule so you can see from month to month how much of your payment is being applied to interest and principal.

3. Mortgage Programs

There are many different mortgage programs.  Your mortgage professional can let you know what is available to you depending on whether you are purchasing or refinancing, have 20% for a down payment or have no down payment, what your credit score is and a variety of other factors.

4. Closing Costs and Prepaid Fees

The closing costs depend on various factors: Are you buying the interest rate down?  Are you having the closing costs paid with a credit from the lender?  What the lender, appraiser and escrow fees are, how much are the property taxes and home owner insurance?

You will receive many disclosures right when you apply for your loan.  Be sure to ask your lender any questions you may have regarding the costs.  There have been many changes in regulations and one of them is that the closing costs can not vary very much from what you are initially issued in writing to when you sign the closing documents.

5.  Mortgage Rates

While mortgage interest rates may change several times a day, there are a few market factors that your mortgage professional should be paying attention to and should be able to advise you on.

Which brings up the issue of shopping interest rates between lenders.  It is not always easy to compare a rate from one place to the next.  Why?  Because not only do rates change every day, they sometimes change several times during the day.  There are other factors that determine the interest rate you are being quoted, is the lender giving you a credit to pay for some or all of your closing costs?  How much is the lender charging you?  One thing to remember, if it sounds to good to be true, it probably is.

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