Your mortgage rate refers to the interest on your home loan. These rates change due to uncontrollable shifts in the economy. However, to make loans more accessible, mortgage interest rates are adjusted based on a borrower’s risk level. Risk is determined by your credit score, down payment, and more. Ultimately, the more risk, the higher your rate. You may get a high rate with poor credit or a small down payment. But you can expect a lower mortgage interest rate with good credit or a sizable down payment.
Mortgage rates are not always set in stone. Unless you lock in your rate with a lender, your mortgage rates may go up as early as tomorrow. However, a locked rate generally lasts between 15 and 60 days but can sometimes last up to 120 days! By locking your rate, you ensure the interest on the loan will not increase during that specified period. If you choose not to lock your rate, you may lose that magical mortgage rate you were quoted if rates.
You can calculate your monthly mortgage payment by hand or using an online calculator. To determine the potential cost, you need to know the principal loan amount (P), the monthly interest rate (i), and the length of the loan term (n). Then, simply follow the below equation to find out your monthly mortgage payment:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
If the math seems a little daunting, don’t worry. Use our free mortgage calculator!
Refinancing a mortgage is when a homeowner takes out a new loan to replace their current loan. The results are often lower interest rates and monthly payments, making a mortgage refinance a wise financial decision. Some folks even refinance to a different loan type or term length, allowing them to pay off their mortgage earlier than expected or obtain access to their home equity. If you are considering refinancing, use a mortgage refinance calculator to help guide your decision.
Determining your mortgage payment means you must consider everything that goes into it. The principal loan amount and monthly interest rate comprise most of the total housing payment. However, there are three other expenses to remember when calculating mortgage payments: homeowners insurance, private mortgage insurance, and property taxes. Use our free mortgage calculator or speak with one of our mortgage advisors for an estimate by calling us today!
When you close a home loan, your first payment could be due anywhere between 30 and 60 days. Mortgage payments often are due at the beginning of the month. However, that does not mean your first payment is due the very next month after purchasing. Instead, your first mortgage payment is due at the start of the following month after you have lived in the home for 30 days. For example, if you close on a house at any time in January, the first mortgage payment is not due until March 1st.
Credit score requirements are based on mortgage type. For conventional home loans, lenders prefer a credit score of 620 or higher. You can still be eligible with a lower score but will likely face higher interest rates as a result. For VA and FHA loans, lenders typically want a credit score of at least 580 but can be negotiated with a notable down payment. Poor credit does not always prevent homeownership, but good credit can save you much more money over time.
The Federal Housing Administration provides FHA loans to help low and moderate-income borrowers become homeowners. FHA prerequisites are more generous than conventional mortgages. All you need for these loans is a credit score of 580 and a down payment of 3.5% of the total loan amount. FHA loans are ideal for anyone in a less-than-perfect financial situation looking to buy or refinance a mortgage.
The most significant factors determining your mortgage price range are your debt-to-income ratio and comfort level. A good rule of thumb to follow is the 28/36 rule. That refers to not spending more than 28% of your monthly income on a mortgage payment or more than 36% on your monthly debt. Use this rule as a starting point to get an idea of how large of a mortgage you can afford, but consider your entire financial situation before closing.
Pre-qualification or pre-approval is an essential first step in the mortgage application process. While often used interchangeably, pre-qualification and pre-approval do differ. A pre-qualification is based on data that estimate how large a mortgage you qualify for. On the other hand, a pre-approval verifies that data with a credit check and results in a conditional commitment. A pre-qualification is fine if you are just starting, but a pre-approval is more fitting if you want to make an offer soon.
To qualify for a mortgage, you need dependable income, good credit standing, and a fair amount of savings. Lenders will verify this information beforehand to ensure you meet their qualifications. The best way to know if you qualify for a mortgage is through pre-qualification or pre-approval. Both give you an accurate assessment of whether or not you are eligible. Call today and speak with one of our specialists to see if you qualify!
Being denied a mortgage means you don’t meet the lender’s criteria. Lenders thoroughly vet consumers, so getting denied is certainly not unusual. Checking your credit report is a great way to determine what is pulling you down. Common culprits for mortgage denials are poor credit scores, undersized down payments, and lopsided debt-to-income ratios. Our staff can help you pinpoint these concerns and advise you on what to do next for mortgage approval.
To apply for a mortgage, you must prove who you are, how much money you make, and how much you spend. In other words, you need to show your mortgage lender documented proof of your identification, income, and expenses. Examples include your license, pay stubs, bank statements, tax returns, etc. While compiling these records is time-consuming, remember to do your best to meet all the lender’s documentation requests to ensure a quick and successful close on your home loan!
Choosing the right mortgage is a big decision with many options to choose from. There are conventional mortgage loans for the average homebuyer, but also government-insured loans as well. FHA mortgage loans help those with low or moderate incomes and are typical for first-time homeowners. VA mortgage loans are available amongst all active and veteran military service members. Call Wesley Mortgage today, and we can help you find the type of mortgage that best fits you!
A down payment of at least 20 percent is often recommended for the lowest available mortgage rates and prices. However, those unable to afford that can get by with a smaller payment, although it may come with additional costs. Under certain circumstances, smaller and even zero-down mortgage options, such as FHA, USDA, and VA loans, are available at no extra cost. Remember, the more you can pay upfront with your down payment, the less you’ll have to pay later.
Mortgage insurance reduces the risk for the lender offering you a loan. For FHA and USDA loans, this sort of insurance is nearly unavoidable. However, when it comes to conventional loans, mortgage insurance is often only required of borrowers making a down payment of less than 20 percent of the home’s purchase price. While this insurance will increase the cost of your loan, it’s essentially helping you qualify for a loan you otherwise would not be able to.
Often referred to as “buying down the rate,” mortgage points allow homebuyers to pay more upfront for a lower interest rate. Borrowers can buy mortgage points, each costing one percent of the loan amount, from their lender to reduce mortgage rates. For example, with a $100,000 loan, one mortgage point costs $1,000. While mortgage points are not required, they provide an opportunity for those looking to shave off some of their interest rates and save money over time.
While mortgage closing costs may sometimes surprise the buyer, the good news is that they are often negotiable. Suppose you get presented with a closing cost bill outside your price range. In that case, you can often work out an agreement with the lender to go down the list of fees and adjust them accordingly, making it more easily affordable.
This is an easier mortgage question to answer, though it can still vary quite a bit. In general, you might be looking at anywhere from 30 to 45 days for a typical residential mortgage transaction, whether it’s a mortgage refinance or home purchase. Of course, stuff happens, a lot, so it’s not out of the ordinary for the process to take up to 60 days or even longer. At the same time, there are companies (and related technologies) that are trying to whittle the process down to a couple weeks, if not less. So, look forward to that in the future!
A mortgage lender's payment is the loan origination fee, often a part of the closing costs. This fee is at most one percent of the total loan amount. What does this payment cover? A mortgage lender’s services include processing loan applications, underwriting loans, and preparing mortgage documents. Homebuyers should know where their money goes, but the lenders’ share is minuscule.
A 20% down payment is ideal for good approval odds and low-interest rates but not required. However, a down payment of less than 20 percent on a conventional home loan will require private mortgage insurance (PMI). This insurance helps lessen the risk for the lender and protects them if you cannot pay for the loan. It is also worth noting that FHA loans require down payments of as little as 3.5%, and VA loans even provide zero-down options.
A mortgage pre-approval often lasts for 60 to 90 days. If you fail to make an offer before this time expires, you will need to get pre-approved again. Pre-approvals eventually expire because lenders want your most up-to-date data. Luckily, it is more manageable after the first time since most of your information remains on file. However, applying for pre-approval again will result in another hard inquiry on your credit, which can impact your score.
Mortgage closing costs are the final hurdle for homebuyers. These costs include various service fees, such as appraisals, inspections, assessments, insurance, loan origination, taxes, etc. The average price for closing costs typically runs between two and five percent of the total loan amount. For example, a $250,000 home will likely require buyers to pay between $5,000 to $12,500 out of pocket in closing costs. No-closing-cost loan options are sometimes available, so be sure to inquire about that with your loan officer if interested.
A. This is entirely unique to your financial situation, what you want to buy, how long you plan to live in the home, and more. With options that range from a standard 30-year fixed-rate home loan to an adjustable-rate mortgage that lets you pay less in interest for the first few years, your best bet at finding the right loan is to speak with an expert. Our mortgage loan advisors can spend time understanding your needs and goals to assist you in determining the best loan program for you
You can lock in your mortgage interest rate as early as you want, but at least five days before closing, you must do so. By locking in your rate early and closing before it expires, any changes to the market within that time do not affect you. Therefore, the best moment to lock in mortgage interest rates is at their lowest. However, that is difficult to predict, so it ultimately depends on when you feel most comfortable.