Mortgage Costs

Most buyers require a mortgage. Work with your lender to pinpoint your monthly payment, the costs of your mortgage and the difference in offers. Your mortgage costs can vary significantly depending on your loan type and interest rate. Today’s most common loans include:

• Fixed Rate– These are conventional loans with fixed, stable interest rates for the life of the loan, usually 30 and 15-years.
• Adjustable Rate– Adjustable Rate Mortgages (ARMs) start with a low rate for a specific period, then fluctuate based on the market conditions. ARMs are better suited for borrowers who want to stay in their homes for shorter periods, such as eight years or less.
• FHA– The Federal Housing Authority (FHA) secures the loan, which is generated by a mortgage lender. FHA loans are helpful for many first time homebuyers as only a 3.5% down payment is required. Borrowers must pay mortgage insurance for their FHA loans, which generally carry attractive mortgage rates and less stringent guidelines.
• Jumbo– These loans are for buyers who must borrow more than conventional limits set by Fannie Mae and Freddie Mac – $417,000 for most of the country, and up to $729,750 in higher-priced markets. The interest rate is generally higher because there is more risk to the lender.

  

Insurance

• Homeowners’ Insurance– You also need to insure the value of the home against fire, theft, flood and more. Shop around for the best price and remember this cost can go up each year, especially if you file a claim.
• Private Mortgage Insurance (PMI)– If you put down less than 20% on a mortgage, you’ll need to pay PMI, which protects your lender against a potential default on the loan. PMI generally runs up to 0.75% of the loan amount, depending on your loan to value and credit score.