Question 1

What is the difference between Fixed and Adjustable rates (ARM)?

Accepted Answer

Fixed rates remain the same for the entire loan term (e.g., 30 years), offering stability. Adjustable Rate Mortgages (ARMs) have a fixed rate for an initial period (e.g., 5 or 7 years) and then fluctuate with market rates. ARMs often start with lower rates but carry more risk.

Question 2

Does my Credit Score (FICO) affect my Mortgage rate?

Accepted Answer

Yes, significantly. A score of 760+ can get you the best market rates. A score below 620 might make it difficult to qualify for a conventional loan, though FHA loans are available for lower scores.

Question 3

What is PMI (Private Mortgage Insurance)?

Accepted Answer

If your down payment is less than 20% of the home's value, lenders usually require PMI. This insures the lender (not you) in case you default. PMI costs usually range from 0.5% to 1% of the loan amount annually.

Question 4

What is the minimum down payment required?

Accepted Answer

For conventional loans, it's typically 3% to 5% (though 20% avoids PMI). FHA loans require 3.5%. VA and USDA loans may offer 0% down options for qualified borrowers.

Question 5

Does the monthly payment include Taxes and Insurance?

Accepted Answer

This calculator estimates Principal and Interest (P&I). However, most lenders require you to pay Property Taxes and Homeowners Insurance into an Escrow account as part of your monthly bill. This is often called PITI (Principal, Interest, Taxes, Insurance).

Question 6

Can I make extra payments?

Accepted Answer

Yes. Most mortgages allow you to make extra principal payments without penalty. This is a fantastic way to reduce your term and save thousands in interest.

Question 7

What are Closing Costs?

Accepted Answer

Closing costs are fees paid at the finalization of the mortgage, including origination fees, appraisal fees, title insurance, and more. They typically range from 2% to 5% of the loan amount.

Question 8

What happens if I miss a payment?

Accepted Answer

You will be charged a late fee. More importantly, payments more than 30 days late are reported to credit bureaus, which can drop your Credit Score significantly.

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