Financing  Overview

Types of Mortgages

Fixed Rate Mortgage:  A fixed term (for example, 15 or 30 years) as well as a fixed interest rate.  The interest rate and term are fixed at the start of the mortgage.  The monthly amount for the payment of principal and interest will not change during the term of the mortgage.

Adjustable Rate Mortgage:  Often referred to as an ARM. The interest rate on the mortgage will be adjusted up or down according to current interest rate levels.  The monthly amount for the principal and interest payment will go up or down with these rate changes. These mortgages may include "Interest Only" type of loans.

These are the 2 most popular types of mortgages used today.  There are easily 10 times this number of financing types – not to mention the hundreds of various configurations of rates and point options that are offered..

Mortgage Payments Typically Consists of –

Principal: The repayment of the original amount borrowed on a monthly basis.
Interest: The cost of borrowing the principal amount, repaid on a monthly basis.
Taxes: Real Estate taxes paid to a local government agency.
Insurance: Homeowners insurance on the home. Also any mortgage insurance, which is paid to protect the mortgage company.  

The total of these items is known as the PITI (Principal/Interest/Taxes/Insurance) payment.

How much down payment do I need?

One of the first questions that home buyers ask is "how much down payment are we going to need”?  Unfortunately, there is no standard answer.  Down payments will vary from 0% (with a VA--Veteran's Administration loan) to upwards of 25% (with certain "non-conforming" loans).  As an average, most home buyers make down payments in the 5%-15% range, although your own personal situation may dictate more or less down payment.  When you are factoring money for a down payment, don't forget about closing costs, which will total in the 3-5% range, payable in cash at the time of closing.

All financing is customizable.  It is necessary to fit the buyer’s specific needs and financial ability into the loan program that best suits it.  There are 100’s of loan programs out there right now.  The most efficient way to find out what programs are available and which is the right choice for you is to schedule a consultation with your REALTOR or a loan originator.

©Copyright 2008 Brenda Jones Real Estate
Licensed in the State of Vermont