Your Mortgage Options

Fixed-Rate Mortgage: The interest on an FRM will not change, so your monthly payments won’t change, making them very predictable.

Adjustable-rate Mortgage: The interest rate on an ARM will often be lower initially, but as interest rates do fluctuate with the market, they can be somewhat unpredictable or even result in higher payments.

Types of Mortgages

There are four main types of mortgages used by 90% of all buyers.

Conventional: This is your standard “loan”, used by buyers with good to excellent credit who make down payments of at least 10%. However, there are programs within the conventional loan that offer options for lower down payments based on buyer credit and location.

FHA: These loans often apply to buyers with lower credit scores, as they offer a down payment as low as 3.5% and lower interest rates. However, FHA mortgages do also require mortgage insurance premiums, which can result in higher overall costs.

VA: All veterans and active military members qualify for VA loans. These offer up to 100% financing, simplified loan approvals, and lower interest rates. They can be much lower than conventional loans.

USDA: These loans are available to buyers in rural or low-density areas and offer up to 100% financing and below-market interest rates. Their ideal buyers are of average means with lower credit scores and are buying for modest homes. Additionally, because of the government’s loose definition of the term “rural”, many of the buyers in the smaller communities throughout Southeastern Michigan will qualify for this loan.

What Do Mortgages Include?

There are four main components to a mortgage payment, often abbreviated as “PITI”.

Principle: This is the repayment of the initial amount you borrowed from your lender (in layman's terms, the price of your home).

Interest: This is a payment to the lender for the money borrowed (which ends up adding on to the TOTAL amount borrowed, or the price of your home).

Taxes: Your annual city and county taxes assessed on your property are divided by the number of mortgage payments you make in a year, and added into your mortgage.

Insurance: Your monthly homeowner’s insurance payment covers you against various hazards, and is added to your mortgage payment.

Going Loan Shopping

Before you decide on any particular loan or lender, it’s important to do your shopping. That means meeting with AT LEAST two different lenders to ensure that you’re getting the best rate possible.

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