Mortgage Financing

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Getting Started

Before you begin shopping for a home it is important to determine how much you can afford to spend. It is essential to get pre-approved from a licensed mortgage professional who will be able to offer you several loan options and find the best available loan program for your needs.  

Pre-Approval vs Pre-Qualification

- Buyers who are pre-qualified have provided a lender with their basic information to determine which loan programs they may qualify for.

- Buyers are issued a pre-approval when the lender has collected and verified the buyer’s financial information as needed to submit the loan file to underwriting.

What is included in my monthly payment?

- Your monthly payment will include mortgage Principal and Interest. Your loan servicer can also escrow payments for your Taxes and Insurance so you can conveniently make one monthly payment. 

- Some loans may also carry Private Mortgage Insurance (PMI).

- PMI is provided by a private mortgage insurance company to protect lenders in the event that a borrower defaults. 

- PMI is generally required for a loan with an initial loan-to-value ratio over 80%; occurring if your down payment is less than 20% of the purchase price.

Fixed Rate Mortgage Loans

- Fixed Rate Mortgages typically have a term of 15, 20, or 30 years.

- The interest rate will remain the same for the life of the loan, regardless of changes in market interest rates.

- Monthly loan principal and interest payment will be consistent.

Adjustable Rate Mortgage (ARM)

- Adjustable Rate Mortgages typically have 5-year, 7-year, and 10-year fixed-rate periods. 

- At the end of the fixed-rate term, the interest rate will adjust higher or lower. depending on market interest rates. (Most ARM’s have a “rate cap” which will limit the amount the rate can increase or decrease). 

- ARM’s typically offer a lower interest rate for the initial fixed term (i.e. first 5 years or 7 years).

Additional Considerations

- It is critical to speak with a loan officer to explore your mortgage options and obtain a pre-approval. 

- Certain loan programs offer lower down payments and closing costs. Ask your lender to explain various these programs to you. 

- Your lender will issue a worksheet outlining your estimated closing costs and monthly payment so you can choose the program that works best for your budget.