What are the different types of mortgage loans?

There are several types of mortgage loans, including:

• Fixed-Rate Mortgage: The interest rate remains the same for the entire loan term.

• Adjustable-Rate Mortgage (ARM): The interest rate can change periodically based on market conditions.

• FHA Loan: A loan backed by the Federal Housing Administration, typically for first-time buyers with lower credit scores.

• VA Loan: A loan for veterans and active-duty military members, often requiring no down payment.

• Conventional Loan: A loan not insured or guaranteed by the government, often with stricter credit requirements.

What is the difference between pre-approval and pre-qualification?

• Pre-qualification is an informal estimate of how much you might be able to borrow, based on the information you provide to a lender.

• Pre-approval is a more formal process where the lender verifies your financial information (credit score, income, debt) and gives you a specific loan amount for which you’re approved.

How do I qualify for a mortgage?

To qualify for a mortgage loan, lenders typically look at:

• Credit score: A higher score generally helps you qualify for better rates.

• Income and employment status: Lenders want to ensure you can afford the monthly payments.

• Debt-to-Income Ratio (DTI): This is the percentage of your monthly income that goes toward paying debts.

• Down payment: A down payment of at least 20% is typical for conventional loans, but some loans allow for lower down payments.

How much should I put down on a mortgage?

A traditional down payment is usually 20% of the home’s purchase price. However, some loans allow for smaller down payments:

• FHA loans can require as little as 3.5%.

• VA and USDA loans often require no down payment at all.

What are closing costs?

Closing costs are fees associated with finalizing a mortgage loan. These can include (but are not limited to):

• Appraisal fees

• Title insurance

• Inspection fees

• Loan origination fees

• Recording fees Closing costs typically range from 2% to 5% of the loan amount.

What is private mortgage insurance (PMI)?

PMI is insurance that protects the lender if you default on your loan. It's typically required for conventional loans when your down payment is less than 20%.

How is my mortgage payment calculated?

Your monthly mortgage payment is typically made up of:

• Principal: The amount you borrowed.

• Interest: The cost of borrowing the money.

• Taxes: Property taxes.

• Insurance: Homeowners insurance and, in some cases, mortgage insurance.

Can I pay off my mortgage early?

Yes, most mortgages allow for early repayment without a penalty. However, some loans may include prepayment penalties, so it’s important to check the terms of your loan.

What is the difference between a loan term and a loan rate?

• Loan term refers to the length of time you have to repay the loan (e.g., 15 years, 30 years).

• Loan rate is the interest rate charged by the lender on the loan. This rate can be either fixed or adjustable.

Can I refinance my mortgage?

Yes, refinancing allows you to replace your current mortgage with a new one, often to secure a lower interest rate or to change a loan term. It can be a way to reduce monthly payments, pay off the loan faster, or consolidate debt.