Frequently Asked Mortgage Questions

A mortgage is a loan used to finance the purchase of a property, usually a home. The property itself serves as collateral for the loan, and the borrower is required to make regular payments until the loan is paid off.

A fixed-rate mortgage has an interest rate that stays the same for the entire term of the loan, while an adjustable-rate mortgage (ARM) has an interest rate that can change periodically, based on market conditions.

The down payment is the amount of money you pay upfront when you buy a property. It is typically expressed as a percentage of the property’s purchase price. For example, if you are buying a home for $200,000 and the down payment is 10%, you would need to pay $20,000 upfront.

The amount of the down payment can vary depending on the type of mortgage, the lender, and other factors. Typically, down payments range from 3% to 20% of the purchase price. Some government programs, such as FHA loans, allow for lower down payments.

A pre-approval is a preliminary approval for a mortgage. It is based on a review of your credit score, income, and other financial factors. Pre-approval can help you determine how much you can afford to borrow, and it can also make your offer more attractive to sellers.

The mortgage rate is the interest rate you pay on your mortgage loan. It can be either fixed or adjustable, and it can vary depending on market conditions and other factors.

The mortgage term is the length of time over which you will make regular mortgage payments. It can range from 15 to 30 years, or more in some cases.

Closing costs are fees and expenses that you must pay when you close on a mortgage. They can include things like appraisal fees, title insurance, attorney fees, and more. Typically, closing costs can range from 2% to 5% of the purchase price of the home.

PMI is insurance that lenders require borrowers to pay when they make a down payment of less than 20% of the purchase price. PMI protects the lender in case the borrower defaults on the loan.

Yes, there are some ways to avoid paying PMI, such as making a larger down payment, taking out a second mortgage to cover part of the down payment, or choosing a lender that offers lender-paid mortgage insurance (LPMI).

Points on a mortgage, or discount points, is a way to lower the interest rate by paying an upfront fee at closing. One point typically costs 1% of the loan amount and can lower the interest rate by 0.25% to 0.5%.

Yes, you can refinance your mortgage to get a lower interest rate, change the loan term, or switch from an adjustable-rate to a fixed-rate mortgage. Refinancing can be a good option if interest rates have gone down or your credit score has improved since you took out the original loan.

A HELOC is a line of credit that allows you to borrow against the equity in your home, similar to a credit card. You can borrow up to a certain limit and repay the loan as you use the funds. HELOCs typically have variable interest rates that can change over time.

Foreclosure is a legal process that lenders use to take possession of a property when the borrower defaults on the mortgage. The property is sold at a foreclosure auction to recoup the unpaid balance of the loan.

A short sale is a process in which the homeowner sells the property for less than the outstanding balance of the mortgage. This requires the lender’s approval and can be a way for the homeowner to avoid foreclosure.

If you can’t make your mortgage payments, you should contact your lender as soon as possible to discuss your options. Depending on your circumstances, the lender may be able to offer you a loan modification, forbearance, or other assistance. If you continue to miss payments, the lender may begin the foreclosure process.