Mortgage questions are one of the most common questions homebuyers have when buying a home, not knowing about mortgage and rates is something that a lot of people have no clue how it works so don’t feel bad.
A mortgage is a complicated language to many. Not understanding how mortgages work is a reason why many people don’t take the first step to buy a house.
Mortgage Questions and When Do They Come Up
Mortgage questions come up all through the home buying process. There isn’t a specific time when buyers ask questions more than other times, it’s different for every potential homebuyer.
Here are some questions that the professionals at Property Records asked some experts.
Is a 20% Down Payment Really Necessary?
A 20% down payment isn’t required. But the sweet spot happens to be 20%, you can qualify for many reductions but it all depends on the individual. For example, the Federal Housing Administration loan lets borrowers put down as little as 3.5% with a credit score of 500 as long as you’ve been working at the same place for over at least two years. To answer your question, no, 20% down payment isn’t necessary. You can still get the house for fewer than 20% down.
People who are active in the military can apply for a Veteran Affairs loan that allows then to put 0% down payment. Some counties in the United States Have loan programs that help low-income people receive a down payment subsidy, that’s a sweet deal if you ask me.
My Mortgage Interest Rates Are A Lot Higher Than Advertised, Why is That?
Mortgage interest rates advertising is like car sales advertising, only people with the highest credit scores and the highest down payment will receive a great advertising price. It’s an advertising trick that’s been used for decades. If you look closely you will see a “*” also known an asterisk sign saying this is the best possible rate.
The average buyer with a lower credit score will have higher mortgage interest rates and will be considered a risk.
Overall it depends on your loan size, so your credit score and loan-to-value ration are taken into effect. The best thing to do is to read the fine print on the loan application.
Is a 30-Year-fixed-Rate Loan the Best Option?
Whie many might think a 30 year fixed rate loan is better because the payment is lower there isn’t a one-size-fits-all loan. It all depends on what the buyer can afford and how much he or she can give down for the down payment.
Is Private Mortgage Insurance Needed?
If your down payment was under 20% you will need Private Mortgage Insurance also known as PMI. PMI will take care of the payment if you can’t pay your mortgage. The average PMI payment will be about 0.3% to 1.15% of your home loan. At the end of the day, 0.3% to 1.15% can be a big amount each month; this is why many new homebuyers will rather give down 20% or more to skip on the PMI.
Many people see PMI as a bad thing but it has its benefits and the law requires it.