Lets you make a lower down payment by insuring the lender against loss if you fail to pay your mortgage Lenders most likely require PMI Private Mortgage Insurance (PMI) A type of insurance used to protect lenders if a borrower puts less than 20% down on a home purchase You put a percentage of the home's value down and borrow the rest through your mortgage loan down payment of 20% or higher provides the best interest rates and most options down payment between 5% and 19% you probably have to pay higher interest rates or fees
Prepayment penalty may apply even if you sell your home step 4 of Choosing the best mortgage for you choose the right down payment for you down payment the amount you pay toward the home yourself Payment often starts out lower than with a fixed-rate loan, but your rate and payment could increase quickly where to check for risky loan features the Loan Terms section on the first page of your Loan Estimate balloon payment a final loan payment that is much larger than the regular monthly paymentsĭepending on the terms of your loan, the balloon payment could be as large as the entire balance on your mortgage prepayment penalty An amount you have to pay if you refinance or pay off your loan early If your score is below 700, you will likely pay more for your mortgage step 3 in Choosing the best mortgage for you pick the mortgage type - fixed or adjustable - that works for you Fixed Rate Mortgage A mortgage where the principal and interest payments remain constant throughout the entire duration of the loan.Ĭhoose this when you want predictable payments Adjustable Rate Mortgage (ARM) interest rate and payment changes during the life of the loan could increase quickly If you shop outside of this period, any change triggered by shopping should be minor - a small price to pay for saving money on a mortgage loan
your credit, credit scores and how wisely you shop for a loan that best fits your needs have a significant impact on your mortgage interest rate and the fees you pay credit score about 35% is based on whether or not you pay your bills on timeĪbout 30% is based on how much debt you owe credit scores and shopping for a mortgage most credit score models allow 14-45 days to shop for a mortgage with little or no impact on your score Homeowner's Association dues Monthly or yearly fees that pay for the maintenance of shared areas and necessary repairs throughout the community define what is affordable to you - know your numbers worksheet 1) estimate your total monthly home paymentĢ) look at the percentage of your income that will go toward your monthly home paymentģ) look at how much money you will have available to spend on the rest of your monthly expenses rule of thumb for total monthly home payment should be at or below 28% of your total monthly income before taxes formula for the % of income going toward monthly payment estimated total monthly home payment divided by total monthly income BEFORE taxes step 2 in Choosing the best mortgage for you understand your credit
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