June 7th, 2016 5:05 AM by Jackie A. Graves
At first glance, mortgages may look like an endless,
roiling sea of numbers. And truth told, between interest rates and credit
scores, it’s all enough to make most home buyers feel like they’re drowning.
that doesn’t mean the math has to be a killer—all
you need is our handy primer to help you decipher the main figures that
you really should understand,
at least as a starting point. We’re here to help!
of first-time buyers who report being completely unfamiliar with the mortgage
process, according to the Consumer Financial Protection
Bureau’s National Survey of Mortgage Borrowers. Yikes!
understanding of how a mortgage works can save you major money. So be sure to
find a lender and Realtor® who are happy to answer all your questions,
and study up online (realtor.com® has a ton of mortgage articles) and learn to make smart
choices in order to save big.
average amount American homeowners owe
on their mortgage.
of borrowers who apply to only one lender, according to the CFPB survey.
the thing: Not bothering to shop around can cost you. When buying a new
car, most folks generally visit several dealerships to
ensure they’re getting the best deal. The same is true when getting
quotes from lenders.
loan estimates from at least three lenders, and look closely at the terms. And
make sure you’re doing an apples-to-apples comparison before deciding
which lender you want to use.
credit score you typically need to qualify
for the best interest rates on
a mortgage. No question, this is a very strong credit score.
Not sure if your own credit is in such good shape? Go
to AnnualCreditReport.com, where you can get a
free copy of your report every 12 months. Your report doesn’t include your
credit score, though—you’ll have to pay a small fee for that.
you’re a few points shy of the 740 mark, there are steps you can take to boost your score,
including increasing the limits on your credit cards and getting errors on
your credit report removed.
in cash that borrowers must make for a down payment on a conventional
loan. Can’t afford a 20% down payment? See our next point…
minimum credit score you need to qualify for a Federal
Housing Administration loan.
loans let borrowers qualify for a mortgage with a down payment as low as 3.5%.
(The exception: People with credit scores between 500 and 579 are still
eligible, but they must make down payments of at least 10%.) FHA loan
limits vary by county; go to HUD.gov’s FHA mortgage limits database to
learn more, and make sure you work with anFHA-approved lender.
the average buyer stays in a home, according to a study
by the National Association of Home Builders. Your time horizon
is one of the key factors to consider when deciding what type of mortgage to
mortgage offers a
lower fixed interest rate for the initial period, but the rate can change over
time, depending on market conditions. For instance, a seven-year ARM might be a
better option than a 30-year fixed loan if you’re buying a home but plan to
sell it within five years.
your long-term plan with your lender to determine the
best loan for your specific needs.
of home buyers who used retirement savings to make their down payment,
according to the National Association of Realtors®’ 2015
Profile of Home Buyers and Sellers. But if you’re considering buying a home by
dipping into your 401(k) or IRA to come up with the cash for the down
payment, beware. If you borrow from either plan before age 59½, you’ll get
hit with a 10% excise tax on the amount you withdraw, on top of the regular
income tax you pay on withdrawals from traditional defined contribution plans.
percentage if you co-sign on a home mortgage. Unfortunately, many parents
don’t understand what they’re agreeing to when they offer to co-sign
on a loan for their
kid. As a co-borrower, you’re responsible for any missed payments. If your
child falls behind on the mortgage payment, that blunder could damage
of seniors age 65 and older who carry a mortgage—a rate that has more than
doubled since 1992, according to a report
by the Joint Center for Housing Studies of Harvard University. If
your goal is to be mortgage-free by the time you retire, you might need to
accelerate your mortgage payments.
By Daniel Bortz - To view the original article click here