As the summer homebuying season begins to wind down, here are some frequently asked questions.
What is private mortgage insurance?
Private Mortgage Insurance (PMI) is to protect the mortgage lender if a loan defaults. It is required if the loan amount is more than 80% of the home’s value. PMI also helps homebuyers.Without mortgage insurance, homebuyers would need to require a down payment of at least 20% of the loan amount.
Will my fixed rate mortgage payment fluctuate throughout the life of the loan?
A fixed rate loan offers a fixed term (for example, 15 or 30 years) and a fixed interest rate. The monthly amount for the payment of principal and interest will not change during the term of the mortgage in this case. However, your monthly mortgage payment may also include taxes and insurance, which may fluctuate over the life of the loan.
What is an escrow account?
An escrow account is an account that is setup to collect funds to pay for your real estate taxes, homeowner’s insurance, and private mortgage insurance. Part of your payment each month will be held in your escrow account to make sure the money is available when these payments are due.
Do I need a down payment?
For purchase you do. Some FHA loans are only 3% down payment. The best loan rate would require 20% down. This way you will also avoid mortgage insurance. There are very good deals for 5% to 10% down. Best thing to do is to call and give us the scenario.