What does my Mortgage Payment consist of? |
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Your monthly mortgage payment will be comprised of a number of different elements, which you satisfy with a single monthly payment to your lender.
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What is a down payment? |
The down payment is the amount of cash that you must provide to your lender at closing as a purchase of your equity in the home. This required amount can range from as low as 3.5% of the home value to over 20% - although you are free to contribute a higher amount if you wish. You will also need to pay closing costs to purchase a house, which will increase the amount of cash you need up front. |
What is the difference between a Fixed Rate and Adjustable Rate Mortgage (ARM)? |
Mortgages can come in two types: fixed and variable (known as an Adjustable Rate Mortgage, or ARM):
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What is mortgage insurance? |
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What are points? |
Points are a form of pre-paid interest. In exchange for increasing the upfront payment to the lender you can reduce the interest rate on the loan and therefore the monthly payment you will make. As the purchase of points is a form of interest payment the expense is generally tax deductible. |
What is amortization? |
Amortization is the process by which your monthly principal payments reduce the outstanding amount of your mortgage and increase the equity value. Mortgages amortize over the length of their term to end at $0 when the mortgage is fully paid off. |
What are the FHA loan limits? |
To receive an FHA loan, your desired loan amount must be less than the specified loan limit in your area. These loan limits are set by the FHA and vary by county; higher cost-of-living areas tend to have higher limits. You can see these loan limits here: https://entp.hud.gov/idapp/html/hicostlook.cfm. |
What are the VA loan limits? |
The Department of Veterans Affairs sets limits on the size of VA loans, which vary by county; higher cost-of-living areas tend to have higher limits. You can see these loan limits here: |