Wyndham Capital Mortgage realizes how much confusion comes attached with the home buying process. In addition to a home being one of the largest investments you’ll make in your life, there’re also several stages of buying a home, each with a multitude of steps that need to be completed. To help you keep your head above water and provide you with a port in the storm, we’re offering five answers to frequently asked mortgage questions.
5 Answers to Frequently Asked Mortgage Questions
Should I Get an Adjustable- or Fixed-Rate Loan?
This answer mostly comes down to your finances and personal preferences. You may like the predictable payments of fixed-rate loans, or you may prefer to take a gamble and see if your payment amounts decrease after a specific period of time with an adjustable-rate mortgage. If you know you’ll be in your home for several years, a fixed-rate loan is likely to be your best bet.
How Do I Check My Free Credit Report?
Just like you would with any major purchase or investment, it’s recommended that you first check your credit report and score to see what lenders will see when they run a credit check. Consumers are entitled to a free credit report every 12 months from one of the three major credit bureaus: Equifax, TransUnion and Experian. Look over your report for errors, and be sure to correct them before applying for a mortgage. You may also want to take steps in improving your credit score in order to receive a more favorable interest rate on your loan.
What Is an Appraisal, and Do I Need One?
While this is technically two questions, the first commonly follows the second, so we might as well knock them both out at the same time. A home appraisal is done to determine the true value of a home, which may not be the same as the asking price. Such valuations should be done by licensed, professional and experience experts.
As for the second part of this question, you may have no choice but to have an appraisal done on a home you’re thinking of buying. Lenders want to know the property is actually worth the amount you’re asking to borrow, especially because the property will become collateral for your loan.
Related: What's Included in a Mortgage Loan?
Should I Refinance My Mortgage?
Several factors need to be considered when determining the answer to this question. Current interest rates, your new mortgage payment, how long you’ll be in your current home and closing costs should be examined while you’re reaching a decision. Common reasons/justifications for refinancing a home include:
- Taking advantage of lower interest rates
- Cashing out on home equity
- Converting between a fixed-rate and adjustable-rate mortgage
Be sure to consider your current and future financial situation as well before deciding whether the time is right for refinancing. While interest rates might be favorable, your finances might not be.
What’s Included in a Monthly Mortgage Payment?
Think of your mortgage payment as a single building composed of several floors, with each floor being devoted to a different department. When you pay the monthly total of your loan, it’s like sending employees to staff those separate departments, which include mortgage insurance, principal/interest, taxes and insurance. Some departments receive more employees than others, which means 10 percent of your mortgage payment could be devoted towards interest while 15 percent is funneled to principal.
Not all home loan terms are the same, mainly because not everyone has to have mortgage insurance. You also have the option of paying extra on your loan’s principal, which is always a good idea if you want to pay it off faster.
These are just a few of the most frequently asked mortgage questions. Have more questions? Comment below or make a list and reach out to a knowledgeable and trustworthy home lending professional to learn more.