Buying a home can feel confusing, especially when it comes to mortgages. As such, many home buyers (particularly first-time home buyers) have questions about the process.
So what, exactly, are those questions, and, more importantly, what are the answers?
A recent article from realtor.com outlined some of the most common questions home buyers have about mortgages, including:
- Do I really need a 20 percent down payment? Many buyers think they need 20 percent of a home’s price to put towards a down payment. But while 20 percent is an ideal number, it’s by no means necessary; there are mortgage options out there that will allow you to buy a home with little to no money down, including FHA loans (which let’s borrowers pay as low as 3.5 percent) or a Veterans Affair Loan (which allows active and retired military members to get a mortgage with zero money down).
- Why is the interest rate for my mortgage higher than the advertised rate? When lenders advertise mortgages, they often advertise the best possible rate and include a disclaimer explaining so. In order to secure that rate, you need to meet certain criteria, like a high down payment (up to 40 percent) and an exceptional credit score. If you don’t meet those criteria, your interest rate will be higher than the advertised rate.
- Is a 30 year fixed-rate mortgage the best option? 30 year fixed-rate mortgages are arguably the most well-known, and while they make sense for many buyers, they’re not the right fit for all buyers. Depending on the situation, some buyers may benefit from going with an alternative type of loan — like a 15 year fixed-rate mortgage (for buyers that can afford a higher monthly payment) or an adjustable rate mortgage, or ARM (for buyers that plan to move before the introductory rate expires).