Learn Top 15 Mortgage Questions to Ask Your Lender
6. How do you determine which mortgage choice is best for you?
With so many mortgage alternatives available, it can be difficult to determine how each will affect you in the long run. The following are the most frequent mortgage loan types:
• ARM (Adjustable-Rate Mortgage) • FHA (Federal Housing Administration) Loan
• Loan from the Department of Veterans Affairs (VA)
• Conventional Fixed-Rate Loan
• We propose a conventional loan with a 15-year fixed rate. Why not a 30-year loan? Because a 30-year mortgage will cost you thousands more in interest. That could imply a difference of more than $100,000 on a $250,000 loan!
• Because a 15-year term has a higher monthly payment, you may need to change your home-buying budget to keep your mortgage payment to 25% or less of your monthly income.
• The good news is that a 15-year mortgage pays off in 15 years. Why stay in debt for 30 years when you can pay off your mortgage in half the time and save thousands of dollars in interest? That’s a win-win situation!
7. What effect do interest rates have on your mortgage?
High-interest rates result in greater monthly payments and an increase in total interest paid over the life of your loan. A low-interest rate saves you money both now and in the future.
First and first, just as you can’t time the stock market, it’s practically difficult to time your home purchase to coincide with the lowest loan rates. The past five years have contained some of the most reasonable interest rates ever, according to the Federal Home Loan Mortgage Corporation, and its recent prediction forecasts the trend will continue.
It may be difficult to time your home purchase to coincide with the lowest interest rates, but there are steps you can take to get a lower rate. A benefit of a 15-year fixed mortgage, for example, is that it has a lower interest rate than a 30-year fixed mortgage. A larger down payment might sometimes help you get a better interest rate.
The interest you pay is never applied to the principal sum of your mortgage. That’s why it’s a good idea to lock in a low-interest rate on your mortgage and then pay it off as quickly as possible.
