As interest rates go up or down, a lot of attention is paid to the effect changing rates can have on the housing market. While interest rates do play an important role in your monthly mortgage payment, they are not the only factor to consider.
If you’re planning to purchase a home this year, be sure to understand each of the components that make up a mortgage payment, which can help you determine a monthly payment with which you are comfortable. Here are the parts of a mortgage payment:
Principal: The principal part of your monthly payment pays off the loan amount you initially borrowed to buy your home.
Interest: In return for providing the funds you need to buy a home, lenders charge monthly interest on the principal balance you owe.
Taxes: Property taxes may be collected by your lender on a monthly basis and held in an escrow account to be paid on your behalf as they come due. The good news is: property taxes are usually fully deductible at income tax time. Consult a tax advisor for details.
Homeowners Insurance: Homeowners insurance provides financial protection in the event of losses that are the result of fire, wind, natural disasters or other hazards. Most mortgage lenders require you to have a homeowners insurance policy and may also be collect these funds to hold in an escrow account to pay your insurance company.
Mortgage Insurance: Mortgage insurance protects the lender against financial loss if a customer fails to repay the loan.
- FHA-insured loans require a mortgage insurance premium (MIP)
- VA loans may require a funding fee
- Conventional loans can be insured with private mortgage insurance (PMI)
If mortgage insurance is applicable to your loan, that part of your payment is forwarded to the agency providing the insurance.
If you have questions, our mortgage consultants are always available to help you understand the home loan process! Please also check out our on-line resources such as our mortgage payment calculators!
This table is only to be used as a guide and does not include all loan types or loan features. Not all loan types are available to all borrowers. Borrowers will be subject to qualification and must satisfy all underwriting requirements and conditions. Not all borrowers will qualify. Speak with your mortgage consultant and carefully consider each of your home financing options so you can determine the home loan that is right for you.
As interest rates have dropped to near-historic lows, it’s clear that now may be the right time to buy a home or refinance your mortgage. According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage is 3.60 percent as of August 8, 2019, down from 4.59 percent at the same time last year, and 4.94 percent from November 2018.1
If you’re looking to take advantage of today’s lower mortgage rates, keep the following in mind:
Buying a Home
Buying power. When interest rates drop, the true impact on a home buyer may be their buying power. While home values may not change, the cost to obtain a home goes down. This means that qualified buyers may be able to purchase a higher priced home than they realize.
Down Payment Options. If interest rates look attractive, but the down payment is keeping you from moving forward with the home buying process, remember that low-and-no down payments options may be available such as: conventional loans with 3 percent down, FHA loans with 3.5 percent down, and even USDA and VA loans with no money down.2
Refinancing a Mortgage
Refinancing to a mortgage with a lower interest rate can save you money, and it may also help you pay off your home faster or allow you to access your home’s equity. Try to remember these tips:
Don’t delay. Interest rates change daily, so if you’ve been wondering if refinancing your mortgage to a lower rate will benefit you, don’t hesitate to contact your mortgage consultant. They will be able to compare your existing mortgage to potential loan options, and they can analyze the costs of each so you can make an informed decision.
Be ready. If you decide to proceed with a refinance and your lender asks for information, don’t put it off. Have your documentation and financial information ready so that you can proceed in a timely manner. The last thing you want to do is plan to refinance your home when you’re going to be out of town on vacation, as this will most likely keep you from being able to get everything in place before you’re out of pocket.
If you’re unsure whether now is the right time for you to buy a home or refinance, contact a mortgage consultant near you. We will walk you through your home financing choices so that you can determine the right option for you.
1. Information is based on the Freddie Mac Primary Mortgage Market Survey® at http://www.freddiemac.com/pmms/
2. Low down payment options may not be the best option for all borrowers. Not all borrowers will qualify. Consult your mortgage consultant to review potential loan scenarios and financing options to determine the home loan that is right for you.
All first mortgage products are provided by Prosperity Home Mortgage, LLC dba Edina Realty Mortgage. (877) 275-1762. Prosperity Home Mortgage, LLC products may not be available in all areas. Not all borrowers will qualify. Licensed by the NJ Department of Banking and Insurance. Licensed by the Delaware State Bank Commissioner. Also licensed in AL, AR, AZ, CO, CT, DC, FL, GA, IL, IN, KS, KY, LA, MA, MD, MI, MN, MO, MS, MT, NC, ND, NE, NH, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, WA, WI, WV and WY.
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©2019 Prosperity Home Mortgage, LLC dba Edina Realty Mortgage. All Rights Reserved.
Edina Realty Mortgage recently launched new loan programs with down payment assistance, which offers eligible homebuyers more financing options that require little or no money down.
Homebuyers who qualify for the Welcome Home or BorrowSmart program may be able to purchase a home with a 97% loan-to-value (LTV) first mortgage, plus down payment assistance that may be used to cover the down payment and/or closing costs.
“As a mortgage company, we’re committed to offering new loan programs designed to serve a wider range of homebuyers,” said Joe Brown, president of Edina Realty Mortgage. “We understand that the combination of a down payment and closing costs can be a big financial obstacle to many would-be homebuyers. These programs are designed to help diminish or eliminate that obstacle, so our clients can focus on other matters related to buying a home, such as planning their move.”
The Welcome Home and BorrowSmart programs share similarities, but there are also some important differences. Here are a few features of each program:
Welcome Home program features:1
- No down payment required
- No mortgage insurance
- 1st mortgage up to $484,350 ($726,525 maximum loan amount is available in high balance areas. Contact your mortgage consultant for details.)
- 2nd mortgage is an interest-only, 30 year loan at the same interest rate as the first mortgage
- 30 year fixed rate only
- Purchase and rate-term refinance options available
BorrowSmart program features:2
- Eligible borrowers may receive up to $2,500 in credit towards down payment and/or closings costs
- Conventional mortgage with less than 3% down (if credit is used toward the down payment)
- Credit is NOT a grant or second lien but a true lender credit
- Gifts and other down payment assistance programs may also be applied where eligible
Remember, Edina Realty Mortgage offers a wide variety of loan programs. A low-or-no-down payment option may not be the best option for all borrowers, so be sure to contact your mortgage consultant review potential loan scenarios and financing options to determine the home loan that is right for you.
1. The Welcome Home program is not available in all areas. Income limits apply. Not all borrowers will qualify. This program is only available in the following states: Alabama, Arkansas, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Vermont, and Virginia.
2. Borrower(s) must meet the income eligibility requirements. Other restrictions may apply. Not all borrowers will qualify. Speak to a mortgage consultant for additional information. BorrowSmart is not available in Washington, D.C.
House-to-Home Renovation Loans Offer Options for Agents and Home Buyers
If you’ve been house hunting—or if you’re an agent with a listing that needs work—you’ve probably been there: A home has great bones or offers a lot of space for the money, but some aspects of its condition are likely to frighten most buyers away. With a unique financing option available for homes in need of renovation, however, the property might actually be more desirable than you think.
Our House-to-Home renovation program is designed to make mortgage financing for properties in disrepair more accessible by combining the estimated costs of repairs and the home's purchase price into a single loan. Renovation financing can help home buyers turn a house they like into a home they love, and our loan options may help real estate agents present possibilities in a property, leading to a sale.
The House-to-Home renovation program offers a number of advantages:
- The program offers a 30-year mortgage with a fixed interest rate that will remain the same for the life of the loan.
- Purchase and rate-term refinancing options are available.
- Unsafe homes can be made habitable, which can help improve the neighborhood.
- Buyers may be able to get more house for the money and cover improvement costs.
- The square footage of homes can be increased at a lower cost.
- Agents can offer a greater inventory and close more sales.
There are two types of renovation loans: The FHA 203(k) loan programs for properties that won't need structural repairs, and a conventional loan program for properties that do need structural work. Most types of home improvements are covered with the exception of "luxury" features such as swimming pools or landscaping.
If you choose to purchase, refinance, or market a home that may be eligible for 203k financing, having knowledgeable mortgage professionals to assist you is important. Whether you are a first-time home buyer or an experienced real estate professional, our renovation specialists can help you find the right renovation loan program for your needs.
Buying a home doesn’t have to be stressful. After all, finding and moving into that special home should be one of the happiest moments of your life. If you know what to expect—and you have a knowledgeable team of real estate and mortgage-lending professionals to assist you—finding and financing your first home can be an exciting and rewarding experience. Here are the basics of what you need to know:
Before you even begin to shop, obtain a mortgage preliminary approval. We recommend our Buyer Advantage preliminary approval! 1 We’ll need your most recent 2 years of W-2’s and tax returns, the last 30 days of pay stubs, and 2 months of bank statements. Qualified borrowers will receive a mortgage commitment letter upfront, subject to an appraisal. Some lenders only offer a pre-qualification letter, which doesn’t verify any of the information you provide. A mortgage commitment letter, though, is an important first step and will help you determine how much home you may be able to purchase and can strengthen your bargaining position with sellers.
Once you are issued your preliminary approval, you’ll work with your real estate agent to find the right home. It helps to determine your needs and create a wish list of desirable features. While you visit homes, take notes to be able to determine which homes may warrant a second visit.
Once you find a home you like, you’ll make a purchase offer. Your real estate agent will present your offer to the seller, who will then choose to accept, counter, or reject the offer. When a price is settled on, you and the seller will sign a Purchase Agreement, defining the terms of the sale.
The next step will be to complete the loan application process. If you have already obtained a mortgage preliminary approval, contact your mortgage consultant and let them know you have a contract on a home. They will update your loan application and help you to proceed with the home financing process. If you were issued a Buyer Advantage preliminary approval, most of the work is already completed!
Next, the home will be appraised. An appraisal is a formal, written estimate of the home’s current market value. Your lender will review the appraisal and note any conditions that may be required prior to closing on the loan. You will be provided a copy of the appraisal.
Once any remaining conditions are submitted including the appraisal, title insurance and homeowners insurance, we will issue a final commitment and finalize the details of your closing with your real estate agent and your settlement agent. Your closing documents will be prepared, and you will go to settlement. Make sure you talk to your settlement agent about how you should prepare the funds needed for closing. Today, a wire from your bank is the most popular way, but you may be able to provide a cashiers’ check or money order.
Congratulations, you become the proud owner of your new home!
We hope you have found this overview helpful; contact your local mortgage consultant for more details!
1. Edina Realty Mortgage Buyer Advantage is not a loan approval. A Commitment Letter is based on information and documentation provided by you and a review of your credit report. The interest rate and type of mortgage used to approve you for a specified loan amount is subject to change, which may also change the terms of approval. The interest rate cannot be locked until your offer to purchase a property has been accepted. If the interest rate used for credit approval has changed, you may need to re-qualify. Information provided by you is subject to review and all other loan conditions must be met. After you have chosen a home and your offer has been accepted, final loan approval will be contingent upon obtaining an acceptable appraisal and title commitment. Additional documentation may be required.