04 Feb Mortgage FAQs
Getting a mortgage is a big step for most people. We are frequently asked a number of questions about mortgages, loan types, interest rates, how credit impacts the rate, and much more. We’ve listed the top frequently asked questions we’re asked as a Tennessee mortgage lender, and provided their answers to help explain a little bit about how the process works.
Are there different types of mortgages?
Yes, there are often several mortgage options from which a borrower can choose, depending on their individual financial situation.
- Fixed-rate mortgages
- With this type of mortgage, the interest rate is fixed (stays the same) for the entirety of the mortgage loan. The benefit of a fixed-rate mortgage is that monthly payments will always be the same. It’s a good option if mortgage rates are low at the time you apply for a mortgage. Just bear in mind that, the amount you pay toward the interest is larger at first, but this will decrease gradually as you make your monthly repayments.
- Adjustable-rate mortgages
- With this type of mortgage, the interest rate is adjustable, which means it will fluctuate to match the current interest rate in the market. Your payment amount will change each month because the amount you pay toward the interest will change.
- Government-insured loans
- These loans are insured by the government and include VA, FHA, and USDA loans. These are guaranteed by the government for repayment to the lender should the borrower default on their payments. Because of this, it can be easier to qualify for a government loan.
- Conventional loans
- This is a traditional mortgage loan with a private lender. These mortgages are not backed by the government and are best for those who have really good credit.
Is it beneficial to pay your mortgage off faster?
Yes. The quicker your mortgage is paid off, the less you will be paying in interest. This can save you several thousand dollars, depending on the loan amount and the interest rate.
Am I able to make larger payments than the lender demands?
This depends on mortgage terms with your lender. In most cases, a lender will let you make extra payments to shorten the term of the loan. You may also have the option to make a lump sum payment once a year that goes toward the principal of the loan payment. However, some lenders charge a fee on early repayments.
How much interest will I pay?
This depends on your credit score, financial history, and the current rates being offered at the time. Higher credit scores will get lower rates, whereas poor credit scores get higher rates.
Can I still get a mortgage if I have a bad credit score?
It depends on how low your credit score is. Normally, a score under 520 is more likely to be denied for a conventional mortgage loan. However, going with a private lender is an option for those with poor credit. The downside is that the interest rates can be quite high.
Can I make a down payment of less than 20%?
Yes. In fact, in some cases, you can make a down payment as low as 3%. However, some lenders may require you to pay for private mortgage insurance (PMI) with a smaller down payment. This protects the lender from risks if you suddenly can’t make your payments and default on the loan. This is a monthly payment that will be included in your mortgage payments.
If you are thinking about applying for a mortgage and want to be sure you get the best rates possible, give our Tennessee mortgage lender team a call today!