The Three Aspects of a Mortgage
There are three basic parts of a mortgage: the loan type, the rate type, and the loan term. Understanding each of these pieces, and how they interrelate will help you make the best choice of mortgage.
Loan Type
The mortgage type is determined by the size of the loan, and if the loan involves private investors or a government agency.
Federal Housing Administration (FHA) loans are the easiest type to qualify for, and are generally intended for first time homebuyers. Their down payment and credit score requirements can make homeownership a reality for people with less than perfect credit or minimal savings. A downside to FHA loans is that they require mortgage insurance, adding to the monthly payments. FHA loans are insured by the Federal Housing administration, meaning lenders are protected from losses by a government agency in the event homeowners default on loans. FHA loans are serviced by private lenders, meaning you can get an FHA loan from any lender who is FHA approved.
Conventional loans are serviced by private lenders, without backing from any government agency. They generally have somewhat stricter credit and down payment requirements compared to FHA loans, but can potentially save money over the life of the loan. If you put at least 20% down on a conventional loan, you won’t be required to carry mortgage insurance, which can reduce monthly payments by hundreds of dollars. Some conventional loans intended for first time homebuyers have down payment requirements similar to, or possibly even less than FHA loans, but these will require mortgage insurance.
Veterans Administration (VA) loans are only available to veterans, active-duty service members, and eligible surviving spouses. For those that qualify, VA loans can be a great option. They generally have low credit score requirements, don’t require mortgage insurance, and often require no down payment.
Jumbo loans are mortgages larger than the conventional loan limit. They are similar to conventional loans, but are only necessary in cases where the loan is between $453,100 and $3 million.
Veterans Administration (VA) loans are only available to veterans, active-duty service members, and eligible surviving spouses. For those that qualify, VA loans can be a great option. They generally have low credit score requirements, don’t require mortgage insurance, and often require no down payment.
Jumbo loans are mortgages larger than the conventional loan limit. They are similar to conventional loans, but are only necessary in cases where the loan is between $453,100 and $3 million.
Rate Types
Mortgages are either fixed rate or adjustable rate. Choosing which is right for you is a matter of deciding which best fits your situation.
Fixed-rate mortgages stay at the same interest rate for the entire life of the loan. They are best for buyers who plan to stay in the home for a long time, and want to be able to rely on a monthly payment that will never change.
Adjustable-rate mortgages have a given period of time in which the rate stays the same, typically the first 5, 7, or 10 years of the loan. After that period, the rate will go up or down once a year based on market conditions. This rate type typically allows for a lower interest rate compared to a fixed-rate mortgage, and is ideal for buyers who intend to sell or refinance before the fixed rate period ends.
Term
Term is the full length of the loan. Adjustable-rate mortgages generally have a 30 year term. Usually fixed-rate mortgages have a 15 or 30 year term, but many lenders allow buyers to choose other terms. Both term types have advantages, so chose the type that works best for your situation. Longer terms keep monthly payments lower, meaning you can have more cash on hand to save or improve your home. Shorter terms mean the mortgage will be paid off sooner, plus you pay less interest over the life of the loan and build equity more quickly.
Parts of Your Monthly Mortgage Payment.
Each monthly payment will be composed of three parts - principal, interest, and insurance and taxes.
The principal is the portion of your monthly payment that goes to paying off the balance of the loan. The portion of your payment that goes to the principal builds your equity in the home, as it increases the percentage of the home you’ve paid for.
Interest is the fee paid to your lender, to cover the cost and risk of providing the loan.
Insurance and taxes go to paying property taxes to your local government and homeowners insurance premiums to your insurance company. This part of your monthly payment is only included in your payments to your lender if you have an escrow account. An escrow account is a special type of account that lenders use to hold money that’s used to pay property taxes and insurance premiums. If you don’t have an escrow account with your lender, you’ll need to pay property taxes and insurance premiums separately from your monthly mortgage payments.
Why Choose Us?
Our coordinated team can get your loan processed faster than the competition – guaranteed.
Our personable and extremely knowledgeable loan officers will walk you through your first home buying experience so smoothly, your worries will be left behind.
Licensing and Approvals
247HomeLoans.net holds a Florida Mortgage Brokers license number MBR1749, in the State of Florida. NMLSR ID #1082016. 247HomeLoans.net is a full-service Mortgage Broker. We are committed to providing the highest level of customer service with an emphasis on offering our customers the best advice to save on their monthly expenditures. We are set up with over 20 wholesale lenders and banks, so we can offer both traditional and nontraditional mortgage products. Even if you have been denied by traditional banks we may be able to help you secure financing.
Corporate Office is located at:
11256 Winthrop Main St.
Riverview, FL 33578
**DISCLAIMER: Please note that interest rates, APR’s, closing cost, and monthly payment examples on this page are for illustrative purposes so that borrowers can better understand how programs work. Consumers should note that mortgage rates, APR’s, and payments will likely vary from what is listed in the examples given. Mortgage rates change frequently and not all borrowers will be eligible. Additional restrictions may apply. Please call and speak with a 247 Home Loans mortgage representative for the most up-to-date information.
© 2024 247 Home Loans