Mortgage
Mortgages are an essential part of the homebuying process for most borrowers who aren’t sitting on hundreds of thousands of dollars of cash to buy a property outright. There are a multitude of different types of home loans available for whatever your circumstances may be.
Mortgage
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Many mortgage servicers accept online payments directly through their websites—register for an online account and connect your checking account so you can schedule payments. Another option is to use the online bill-pay service through your checking account to pay for your mortgage. Make sure to find out how far in advance you need to schedule your payment so your loan servicer receives it on time.
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If your credit is bad, you can still be approved for a mortgage through a Federal Housing Administration Loan with 10% down, as long as your credit score is at least 500. You also may be able to improve your credit more quickly than you think to qualify for a conventional mortgage.
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Closing costs are the fees over and above the property purchase price due at the closing of a real estate transaction. They may include fees related to the mortgage loan origination and underwriting, commissions, taxes, and insurance premiums, as well as title and record filings.
Learn More Understanding Mortgage Closing Costs -
Lenders are prohibited from discriminating against borrowers who are ill or disabled, so they are not allowed to ask questions related to your physical condition. Under the Equal Credit Opportunity Act, lenders are not allowed to ask if you are planning a family. In the past, this question was used to discriminate against female borrowers because lenders assumed women would quit work when they became pregnant.
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The longer you can prove income history for self-employment in the same industry, the more likely you are to be approved for a mortgage. As a general rule, you'll want to have at least two years of documented self-employment income at or above the level you need to afford the loan you want.
Learn More How to Get a Mortgage When Self-Employed -
First, interest rates determine how much we will have to pay to borrow money to buy a property, and they influence the value of real estate. Second, low interest rates tend to increase demand for property, driving up prices, while high interest rates generally do the opposite.
Learn More How Interest Rates Affect the Housing Market
Key Terms
- Pre-Approval Definition
A pre-approval letter is a first-look evaluation of a potential borrower by a lender.
Lenders use pre-approval letters for credit cards and other financial products as a marketing tool. A pre-approval letter does not guarantee a specific interest rate.
- Prepayment Penalty
This clause states that a penalty will be assessed if the borrower significantly pays down or pays off the mortgage, usually within the first five years of the loan. The penalty is a protection for lenders against losing interest income, and mortgage lenders are required to disclose prepayment penalties at the time of closing on a new mortgage. They are not legal on single-family FHA loans.
- Adjustable Rate Mortgage
An adjustable-rate mortgage (ARM) is a home loan with an interest rate that can fluctuate periodically based on the performance of a specific benchmark.
ARMs generally have caps that limit how much the interest rate and/or payments can rise per year or over the lifetime of the loan.
- Mortgage Interest
Mortgage interest, calculated as a certain percentage of the full mortgage loan, is the interest charged on a loan used to purchase a piece of property. Mortgage interest may be fixed or variable and is compounding.
- Mortgage Rate Lock
A mortgage rate lock guarantees the current rate of interest on a home loan while a home buyer proceeds through the purchase and closing process—it protects borrowers from the potential of rising interest rates during the home buying process. Typically, a rate lock period ranges from 30 to 60 days.
- Buydown Definition
A buydown is a mortgage financing strategy that lets a buyer obtain a lower interest rate for at least the first few years of the mortgage or possibly its entire life. Buydowns can save homeowners money on interest over the life of the loan. A buydown may involve purchasing discount points against the mortgage loan, which may require an up-front fee.
- Private Mortgage Insurance (PMI)
If you purchase a home with a down payment of less than 20% of the home's cost, you will need private mortgage insurance (PMI). Note that PMI aims to protect the lender, not the borrower, against potential losses. There are four main types of mortgage insurance you can purchase: borrower-paid mortgage insurance, single-premium mortgage insurance, lender-paid mortgage insurance, and split-premium mortgage insurance.
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