Dawn Martini - Helping Families Live the American Dream

Your New Mortgage

When you purchase your new home, there are a lot of choices to make. When you pick the mortgage to finance that new home with, there are even more. If you're in the market for a new home, you will probably be shopping for a new mortgage as well. Often times, it is difficult to tell the difference between them, and what they will cost you in the long run. There are several different options available for you, depending on your needs.

Most first-time buyers will get an FHA loan because it requires only 3% down, and less closing costs out of pocket than conventional loans. The credit and income requirements are typically less stringent than conventional, also. The downside is that you will always have a mortgage insurance premium (MIP) on an FHA loan that will stay on for a minumum of five years or until you refinance into a conventional loan with 20% equity.
If you have at least 5% down, you will probably choose to go with a conventional loan. If you have 20% to put down, you can avoid paying private mortgage insurance (PMI) altogether which can add considerably to your payment. If you do have to pay PMI, when your house goes up in value enough to give you 20% equity, or you have paid the principle down 20%, you can have your lender order a new appraisal and have the PMI removed to lower your payment without refinancing.
If you are eligible for a VA loan, they are usually the best option. They require no money down and you will pay the least amount in closing costs.

Since there are many programs available that will affect your rate, including a fixed rate, or adjustable rate, talk with your mortgage consultant about the different programs to decide which one best fits your needs. Be sure to get a Good Faith Estimate (GFE) from all lenders to compare rates and closing costs from lender to lender, before deciding who you will go with.

Some good questions to ask your loan consultant are:

Is this a fixed rate loan or does the rate adjust? If it is adjustable, is there any time period that it is fixed, and how often will it adjust thereafter?
How long is the term of the loan? 15, 20, or 30 year term?
Can I get a Good Faith Estimate in writing from you?
How many points are there? Is there an origination fee? If so, how much?
Is this an FHA, VA or Conventional loan?
Are you a mortgage banker or broker? Will your company service this loan after it closes? If they are a broker, or will not service the loan after closing, it will be sold to another mortgage company. This usually means the original loan will cost you more money. Double check all of the fees on the GFE.