Conventional Mortgage
This is the standard loan used by buyers with good to excellent credit who make down payments of at least 5%. However, there are programs that offer options for lower down payments based on buyer credit and other factors.
FHA Mortgage
These loans often offer a down payment as low as 3.5% and lower interest rates. However, FHA mortgages do also require mortgage insurance premiums, which can result in higher overall costs.
VA Mortgage
Veterans and active military members qualify for VA loans. These offer up to 100% financing and lower interest rates. They can be lower than conventional loans.
USDA Mortgage
These loans are available to buyers in rural or low-density areas and offer up to 100% financing and below-market interest rates. Their ideal buyers are of average means, have lower credit scores, and are buying modest homes.
Principle
This is the repayment of the initial amount you borrowed from your lender (the price of your home minus the down payment)..
Interest
This is a payment to the lender for the money borrowed (and is then added on to the principal monthly payment your home).
Taxes
Your annual city and county taxes assessed on your property are divided by the number of mortgage payments you make in a year and added into your mortgage.
Insurance
Your monthly homeowner's insurance payment covers you against various hazards and is added to your mortgage payment.
Fixed-Rate Mortgage
The interest on an FRM will not change, so your monthly payments won't change, making them very predictable.
Adjustable-Rate Mortgage
The interest rate on an ARM will often be lower initially, but as interest rates do fluctuate with the market, they can be somewhat unpredictable or even result in higher payments.
Calculating Your Monthly Budget
If the seller accepts your offer, it’s time for a home inspection. Before you close, you’ll want to have an experienced professional walk the home to ensure there aren’t any lingering problems or maintenance issues that might not be visible at first glance. You don’t want to be hit with a serious maintenance or structural issue right after you move in. If necessary, you can request repairs any issues you find or provide a credit for you tackle after you own the home.
Earnest money
Think of this as your security deposit. It’s disclosed when you submit your offer to show the seller that you are serious. When your offer is accepted, it sent to the title company to hold and then it’s applied to your down payment or closing costs at settlement.
Down Payment
This is determined by your loan, or possibly any government programs or assistance you have qualified for.
Closing Costs
These are typically 3% of the home purchase price and represent the fees associated with title work, transfer charges and lender charges.
Requesting a Home Inspection
If the seller accepts your offer, it's time for a home inspection. Before you close, you'll want to have an experienced professional walk the house to ensure that there aren't any lingering problems or maintenance issues that might not be visible at first glance. You don't want to be hit with a serious maintenance or structural issue right after you move in. If necessary, you can request that the seller repair any issues you find.
