We get a lot of questions from people asking us about mortgages. We love to explain different facets of the mortgage process to our borrowers and potential borrowers. We wanted to share a few of these questions and answers with you today, and hopefully give you an answer to one of YOUR questions!
Q: Do I really need a 20% down payment?
A: Sure, if you want a Conventional loan. That’s the baseline for a Conventional loan’s down payment. However, there are other types of loans that don’t require that.
An FHA Loan from the Federal Housing Authority only requires a 3.5% down payment. However, this comes with some stipulations. You will have to have a higher credit score than with a Conventional Loan, and you’ll also have to pay PMI (Private Mortgage Insurance) on the loan. This is a great option if you have good credit but are having trouble putting together your full down payment of 20%.
If you’re a veteran or the spouse of a veteran, you can get a VA loan from the Veteran’s Affairs office. This loan is a 0% down payment loan designed to help returning soldiers and those widowed by war to move into homes.
Q: Can I get anything besides a 30-Year Loan?
A: Sure. The 30-Year is the most typical loan, but we also offer 15-Year mortgages that can help save you money. With the really low rates available right now, a shorter-term loan can get you both a lower rate and save you on interest payments in the long run. If you can afford the higher payments and plan on staying in the home, a 15-year loan is a great investment.
However, you’re still paying more every month. If something happens, and you can’t make that payment, you have to refinance. If you have to refinance, you may not get the same rate you’re getting today.
Q: What’s this PMI I keep hearing about?
A: The most common reference for PMI is with an FHA Loan. PMI is Private Mortgage Insurance, and it’s a payment made each month to the bank to help guarantee your loan. It’s part of your mortgage payment, but doesn’t apply to either your principal or interest.
PMI is what enables you to get a home for less than 20% down. Since you’re not putting as much in the down payment, the bank needs to have some sort of insurance to guarantee that they won’t lose out if you can’t repay them.
Once you have 20% into your home, you can refinance to a Conventional loan, and ditch PMI for good.
Hopefully we helped you answer some mortgage questions today. If you still have questions, ask us in the comments here or on Twitter.
Take advantage of lower mortgage rates to refinance and save money. Call us in St. Louis at (314) 781-9700, Chicago at (773) 770-6438, Indianapolis at (317) 550-1515 or Nashville at 615) 810-8555.
You can always apply online at www.thehomeloanexpert.com, and we’re also open on Saturdays to better serve you. Don’t forget to follow @TheHomeLoanEx on Twitter for breaking mortgage news and knowledge. Nobody gets lower rates on better loans than The Home Loan Expert, Ryan Kelley, why go anywhere else?