Mortgage Essentials

Loan to Value Ratio
If the lender will loan you an 85% loan to value ratio on a property that is appraised or priced $100,000 then you will get $85,000. So you need to come up with $15,000 for down payment.

Loans…Which Type?

Most common loans are two:
-    Fixed rate mortgage: Regardless of interest rate changes on the market/indices your loan interest does not change and thus is more stable and predictable.

-    Adjustable rate mortgage (ARM): has an attractive initial (few months or years) low interest rate then it changes (or increases) according to the market or index rate your lender follows.

Mortgage Duration

The most common three are, 15, 20, and 30-year mortgage. The longer the duration of the mortgage the higher interest you usually pay.

Down Payment: if your down payment is less than 20% then usually the lender requires you to obtain mortgage insurance.

Prepayment Penalty: Ask your lender if their company allows “loan prepayment”

Annually Percentage Rate (APR): The APR is generally higher than the interest rate because it includes the cost of mortgage insurance, cost of points, and other charges.

Discount Points: When you are looking for a home mortgage loan, find out if you can get an interest rate with zero points and how much the rate decreases with each point paid.

Escrow: it is an account set up by the lender which includes your annual fees of property taxes, mortgage insurance, and homeowner’s insurance.

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