Mortgage Loan Downpayment Options

Mortgage termsMortgage Loan Downpayment:

If you can make a downpayment of 20% of the purchase price of the home, whichever mortgage option you choose will not require mortgage insurance.

Mortgage Loan Insurance:

Mortgage insurance is an insurance policy that lenders require if a mortgage loan is greater than 80% of the purchase price.  The mortgage insurance policy compensates the lender for any loss if the mortgage loan is defaulted on.  There is a cost for mortgage insurance.  Mortgage insurance protects the lender, it does not offer you any protection.

I do not have an exact cost on mortgage insurance, but a good number to use for planning purposes is about $84 dollars per month on a $100,000 loan.  You should consult a mortgage lender to see if you will be required to take mortgage insurance and what the exact cost may be.

Minimum Mortgage LoanDownpayment:

Most mortgage lenders ask for 5% to 10% as a downpayment.

No Down Payment Mortgage Loans:

From time to time there are programs that allow for no downpayment by a first time home buyer.

 

Search For Door County Homes Under $200,000


What Credit Score Do I Need to Get A Mortgage Loan?

For traditional mortgage loan programs (long term, fixed rate) you will need a credit score of greater than 620.

If your credit score is at least 580, you may still qualify for an FHA mortgage.

The FHA Mortgage Loan

With a credit score of 580 you may qualify for an FHA mortgage with a downpayment requirement of just 3.5%.

If you have a credit score lower than 580, you might still be able to get an FHA loan if you have a 10% downpayment.

The processing time for an FHA mortgage is longer.  Traditional mortgages can take from 30-45 days; the FHA will take longer than that.

 

Mortgage Loan Length

The length of the term of your mortgage may depend on how long you intend to stay in the home.

If you plan to live in the home for your lifetime, then a 30 or 20 year fixed rate would be better from the standpoint of keeping your monthly mortgage payment manageable.  A fixed rate mortgage has the same interest rate and same monthly payment for the life of the loan.  The fixed rate loan offers predictability and stability.

A 15  year fixed rate loan always has the best, lower, rate.  So if you can manage the payments that will allow you to gain equity in the home more quickly, and pay it off sooner.

There are adjustable rate loans, anywhere from 3-7 years, and these work for some people in some circumstances.

Adjustable Rate Mortgages

In an adjustable rate mortgage loan the rate can change periodically.

The initial interest rate may be lower than that of a fixed rate loan (a 30, 20, or 15 year loan), but after the initial period ends the loan interest rate might go up.

If for instance you take a 7 year adjustable rate loan, the rate will stay fixed for 7 years, but after that seven years the rate can increase once each year.

Some advantages to the adjustable rate mortgage:

–If mortgage rates are falling, your interest rate will fall and you will not need to go through the expense of refinancing

–The initial interest rate is usually lower than you will find in a fixed rate loan

–It is a less expensive way to borrow if you do not plan in living in the house for a long period (10 or more years)

Some disadvantages to the adjustable rate mortgage

–They are difficult to understand!  Lenders have a lot of flexibility when determining the mortgage terms, so it can be easy to get confused and locked into a loan with conditions you do not fully understand

–Rates may rise significantly over the lift of the loan, which can be a shock to your housing budget

 

Talk to a Lender and Get Precise Terms and Mortgage Loan Pre-Approval

The information contained here is intended as a general guideline as you consider buying that first home.  Our further advise is that you talk to a mortgage lender about all of your options, and ask for a loan pre-approval letter before you begin that home search!

Your real estate agent is the best source of information about the local community contacts and real estate topics. Give Lisa Bieri a call today at 920-493-5472 to learn more about local areas, discuss selling a house, or tour available homes for sale.
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Mortgage Loan Considerations
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Mortgage Loan Considerations
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Mortgage loan considerations whether you are a first time home buyer or looking to refinance
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Lisa Bieri & Associates at Door County Realty Inc.
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