Homeowner’s Insurance. Homeowner’s insurance is insurance that covers damage to your home from fire, accidents and other issues. Some lenders require this insurance be included in your monthly mortgage payment. Others will let you pay it separately. All will require you have homeowner’s insurance while you’re paying your mortgage—that’s because the lender actually owns your home and stands to lose a lot of it you don’t have insurance and have an issue.
According to John Lyons, a broker and real estate agent in Chicago, getting a typical mortgage takes an average of 30 to 60 days. So if you’re itching to buy right away, you’ll want to start the pre-approval process soon so you’re ready to go when you find the right house. Lyons recommends getting pre-approved by a reputable company and having all of your financial documentation ready in order to increase your chances of securing a mortgage in a timely fashion.
The mortgage industry works a little differently in the US than it does in many other parts of the world. Mortgage loans are treated as commercial paper, which means that lenders can convey and assign them freely. That results in a situation where financial institutions bundle mortgage loans into securities that people can invest in. The purpose of this system is to quickly free up money for the financial institutions to lend out in the form of new mortgages. The US also has a number of government-sponsored enterprises, such as Freddie Mac and Fannie Mae, that exist to facilitate this system. Most mortgages have fixed rates, which is also a departure from the variable rates that are commonly found in Europe and elsewhere.

Looking back at the flood of foreclosures since the housing crash, it’s clear that many borrowers didn't fully understand the terms of the mortgages they signed. According to one study, 35 percent of ARM borrowers did not know if there was a cap on how much their interest rate could rise [source: Pence]. This is why it’s essential to understand the terms of your mortgage, particularly the pitfalls of “nontraditional” loans.


Eric Bank is a senior business and real estate writer, freelancing since 2002. He has written thousands of articles about business, insurance, real estate, investing and taxes, Eric writes articles, blogs and SEO-friendly website content for dozens of clients worldwide, including get.com and valuepenguin.com. Eric holds two Master's Degrees -- in Business Administration and in Finance. His website is ericbank.com.
Insurance: This will be paid to a homeowner’s insurance company of your choice; this is required when you have a mortgage. Lenders require that your insurance cover the cost of rebuilding the home if it is ruined by fire or other disaster. This “replacement cost” is determined by your insurer, and must be agreed to by your lender. Insurance will typically cost $700 to $1,200 per year for a single family home.
Conventional loans require a home buyer to make a 20 percent down payment and many home buyers don’t have enough cash on hand to make that down payment therefore they are required to pay for mortgage insurance as part of their monthly payment. This insurance protects lenders if a borrower should default on the loan. Until late 2014, Fannie Mae and Freddie Mac required down payments of at least 10 percent. This requirement pushed many home buyers into Federal Housing Administration loans or FHA loans, which have a 3.5 percent minimum down payment. The problem is that FHA premiums are costlier than private mortgage insurance. But in 2015, qualified buyers will be able to get Fannie and Freddie backed mortgages with down payments as little as 3 percent. These premiums will be dependent on credit scores and the size of the down payment. Private mortgage insurance premiums are generally more affordable than FHA premiums.
Tax benefits. The tax code currently provides tax benefits for homeownership. You may be eligible for a deduction for the interest paid on your mortgage, private mortgage insurance premiums, points or loan origination fees, and real estate taxes. And when you sell your primary residence, you may be able to exclude all or part of your gain on the sale of your home from taxable income.
Many real estate agents want you to be pre-qualified for a loan before they will start to work with you. The mortgage pre-qualification process is fairly simple, usually just requiring some financial information such as your income and the amount of savings and investments you have. Once you are pre-qualified, you will have a better sense of how much you can borrow and the price range of the homes you can afford.
Most lenders today will want to know every detail of your financial life. If something looks odd, or doesn’t make sense they will want to have some sort of explanation. This means that you will have to write letter explaining everything. For instance they may want to know why a credit card issuers pulled your credit three months ago when you were trying to apply for store credit, or why you changed jobs a few months ago or why you have moved from job to job over the last couple years. It’s best to write them and explain everything in full detail and move on. They do this simply to verify your financial stability and it is usually something that is requested from time to time.
The amount you put down also affects your monthly mortgage payment and interest rate. If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. But if you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan. Use our calculator to determine whether a 15-year or 30-year fixed mortgage is a better fit for you. Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage.
The major downside of taking out a mortgage is that it does put your home at risk if you fail to make payments. You may want to look into other options if you want to consolidate your debt. Some people choose to refinance their original mortgage to cash out their equity and to avoid two mortgage payments. When they refinance, they cash out the equity or take out more than they still owe on the loan. Like a traditional mortgage, refinancing has set monthly payments and a term that shows when you will have the loan paid off.
According to John Lyons, a broker and real estate agent in Chicago, getting a typical mortgage takes an average of 30 to 60 days. So if you’re itching to buy right away, you’ll want to start the pre-approval process soon so you’re ready to go when you find the right house. Lyons recommends getting pre-approved by a reputable company and having all of your financial documentation ready in order to increase your chances of securing a mortgage in a timely fashion.
A third option – usually reserved for affluent home buyers or those with irregular incomes – is an interest-only mortgage. As the name implies, this type of loan gives you the option to pay only interest for the first few years, and it’s attractive to first-time homeowners because of the low payments during their lower earning years. It may also be the right choice if you expect to own the home for a relatively short time and intend to sell before the bigger monthly payments begin.
A lender offers you a mortgage interest rate based upon a number of factors, but by far the most important is the secondary market for mortgages. Banks typically sell their mortgages to aggregators like Fannie Mae and Freddie Mac, which are government-sponsored enterprises that buy and repackage mortgages. Aggregators issue mortgage-backed bonds to investors in the secondary market. The daily fluctuations of supply and demand affect the interest rates investors require to buy these bonds. As the economy strengthens, investors require a higher interest rate on bonds because of growing competition for their investment dollars. Banks peg their mortgage interest rates to the daily interest rate on mortgage-backed bonds in the secondary market.
The United Way's 2-1-1 hotline connects people with local assistance programs. By dialing 2-1-1, you can receive referrals to organizations that help with food, housing, employment, health care, prescriptions and more. If you are a struggling homeowner, the United Way can help you find a foreclosure prevention counselor and refer you to available mortgage assistance programs. Trained specialists take calls day or night. The United Way may also provide emergency financial assistance to households in danger of losing their homes. Programs vary among locations.
Lenders use the information you provide at the time of application for loan approval or denial. If you get approved, don’t change your employment or income status until after the loan process is complete. Changing your employment or income during the process will significantly delay the lending process at best, and at worst, it could cause you to be denied for your loan altogether.
In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections and title searches. You can also defray costs by asking the seller to pay for a portion of your closing costs or negotiating your real estate agent's commission. Calculate your expected closing costs to help you set your budget.
If you are receiving any sort of financial assistance or even a financial gift for your down payment from someone make sure that you are depositing it into your account at least two months prior to applying for your mortgage. That way the bank will not need to source the large deposit. If this is not done then the gifter will have to write a letter stating that the money was truly a gift and not a loan. If you are needing a loan for the down payment the lender may see this as a sign of financial dependence and it may hurt your chances of obtaining a loan.
Second Lien Modification Program (2MP): If your first mortgage was permanently modified under HAMP SM and you have a second mortgage on the same property, you may be eligible for a modification or principal reduction on your second mortgage under 2MP. Likewise, If you have a home equity loan, HELOC, or some other second lien that is making it difficult for you to keep up with your mortgage payments, learn more about this MHA program.
Tips for First-time Homebuyers Tips for First-time Homebuyers While buying your first home is a big decision, following these essential first-time homebuyer tips can make the process much easier. Explore these tips for first-time homebuyers Bank of America While buying your first home is a big decision, there are also lots of small decisions to make along the way to homeownership. To help you navigate the process, we've gathered suggestions for avoiding some of the most common mistakes. Know your budget Set a budget. Calculate a monthly home payment that takes into account how much home you can afford, then discuss this amount with your lender. Making sure you can meet your projected future home payment is probably the most important part of successful homeownership. Include PITI (principal, interest, taxes and insurance) in your budget. Mortgage calculators will show you how much you'll pay toward principal and interest every month. Remember that you'll also have to pay property taxes and homeowners insurance. Some financial institutions will require you to contribute these funds monthly along with your principal and interest payment. Be sure to talk to your lender to understand what will be included in your monthly payment. Know how much cash you'll need at closing. When you buy your home, you'll need cash for a down payment (see how much you should put down) and closing costs (estimate your closing costs). The down payment typically varies from 5% to 20% or more. Putting less than 20% down will typically require you to pay for private mortgage insurance (keep reading for more on that). Closing costs could be about 3-7% of the total loan amount and will include charges such as loan origination fees, title insurance and appraisal fees. Budget for private mortgage insurance. For conventional financing, PMI is typically necessary if you don't make at least a 20% down payment when you buy your home. Make sure you know how much this cost will be and factor it into your monthly home payment budget. Research your utilities. If you're moving into a larger home than you're used to, a home that is newer or older than you're used to or located in a climate that's hotter or colder than you're used to, ask your real estate professional to find out what the home's energy bills have typically been. This can help prevent being surprised by a higher utility bill than you're expecting. If you're moving into a new community, find out about water costs, too. Don't forget miscellaneous expenses. Be sure to budget for moving expenses and additional maintenance costs. Newer homes tend to need less maintenance than older ones, but all homes require upkeep. If you're considering a condo or a home with a homeowners association (HOA), remember to include HOA dues in your budget. Keep in mind that you should have an emergency fund on hand to prepare for any unexpected changes in your income (like reduction in your wages) or unexpected expenses (like medical bills). Manage your debt carefully after your home purchase. Sometimes your home will need new appliances, landscaping or maybe even a new roof. Planning for these expenses carefully can help you avoid one of the most common causes of missed mortgage payments: carrying too much debt. It's important not to overextend your credit card and other debts so you stay current on your payments. A smart start Research your mortgage options. As a first-time homebuyer, you're undoubtedly anxious and excited about moving into your new home, but take the time to step back, do the research and learn the differences between the various types of mortgages so you'll know which one is best for you. Know your credit score. As soon as you decide to start looking for a home, check your credit report and credit score with any of the 3 major credit reporting agencies: Experian, TransUnion and Equifax. If you find any mistakes that need to be corrected, addressing these issues early will put you in a better position when it's time to buy a house. (Bank of American credit card customers can get a free FICO® score in Online and Mobile Banking.) Find a responsible lender. When you choose a lender, pick someone you feel good about working with. They should listen to you and put your needs first, and they should be able to explain your home loan options in plain terms. It's a good idea to interview potential lenders to find the one that's best for you. Get prequalified for a mortgage before you start shopping. Knowing how much you can borrow will let you keep your search focused on the homes that are right for you. Getting prequalified (you can prequalify for a Bank of America mortgage online) will provide you with an estimate of how much you can borrow before you start looking at homes. You can also apply for a mortgage with Bank of America's Digital Mortgage Experience Calculate your monthly mortgage payment. You can use our Affordability Calculator to help calculate a monthly mortgage payment that fits into your budget. 2018-07-09 2018-07-09
NOTE: These programs are only available to homeowners whose mortgage servicing company agrees to the terms and conditions governing the use of these funds. If your servicer is not currently participating in Keep Your Home California, you may want to call them and encourage them to do so. A homeowner cannot receive assistance if their servicer has not signed an agreement with CalHFA MAC. See a list of participating servicers and which programs they are currently offering.
Virtual Assistant is Fidelity’s automated natural language search engine to help you find information on the Fidelity.com site. As with any search engine, we ask that you not input personal or account information. Information that you input is not stored or reviewed for any purpose other than to provide search results. Responses provided by the virtual assistant are to help you navigate Fidelity.com and, as with any Internet search engine, you should review the results carefully. Fidelity does not guarantee accuracy of results or suitability of information provided.
Mortgages and home equity loans are two different types of loans you can take out on your home. A first mortgage is the original loan that you take out to purchase your home. You may choose to take out a second mortgage in order to cover a part of buying your home or refinance to cash out some of the equity of your home. It is important to understand the differences between a mortgage and a home equity loan before you decide which loan you should use. In the past both types of loans had the same tax benefit, however the 2018 tax law no longer allows homeowners to deduct interest paid on HELOCs or home equity loans unless the debt is obtained to build or substantially improve the homeowner's dwelling. Interest on up to $100,000 of debt which substantially improves the dwelling is tax deductible. First mortgages and mortgage refinance loans remain tax deductible up to a limit of $750,000.
Where to get the best deal. If you qualify for an FHA, VA or USDA loan, you may be able to get a better deal on interest rates and other costs using their programs. Familiarize yourself with their criteria. Whether you choose a government-backed or conventional loan, keep in mind that fees and interest rates can vary widely by lender, even for the same type of loan, so shop around for the best deal. You can start your search by comparing rates with LendingTree.
Since there are so many different types of mortgage loans, it can be difficult to choose the best loan for your needs. If you want a set monthly payment and a definite period of time to pay off the loan, you should look primarily at home mortgage loans. This is a good option if you want to remodel, and you know exactly how much it is going to cost. A home equity loan gives you added flexibility since it is a revolving line of credit. This is a good option if you have several smaller projects you are working on and you are unsure of how much each will cost. It also gives you the opportunity to withdraw the money to cover other expenses like a wedding for your child or to help cover college expenses. Either option does put your home at risk if you default on your payments, even if you are current on your first mortgage. It is important to carefully consider your budget to make sure that you can afford the payments. Once you do this you can be confident in moving forward on either type of loan.
Your debt to income, or DTI. Is the amount of monthly debt payments you have compared to your monthly income. Most mortgages will allow a maximum DTI of 41%, ideally you will want a DTI ratio of no higher that 36%. See how much house you can afford using our calculator. Try not to stretch yourself too thin, if you have a high DTI you will be more likely to miss mortgage payments if an emergency comes up.
Fixed rates and adjustable rates are the most common types of mortgages. Over 90% of US mortgages are fixed rate loans. A second mortgage works the same as a first mortgage, allowing a borrower to take out a lump sum of money and then make monthly payments to pay it back. You can use the second mortgage to make repairs on your house, to consolidate your bills, or to help with the down payment on the first mortgage to avoid needing to pay PMI.
Yes, Keep Your Home California will continue to pay Unemployment Mortgage Assistance benefits to a homeowner’s servicer even if the homeowner exhausts their California Employment Development Department benefits, and remain not fully employed, during the time of Unemployment Mortgage Assistance. Keep Your Home California will stop benefit payments if the homeowner becomes fully re-employed or if it determines that the home is listed for sale, the homeowner is renting or no longer occupying the property, or the homeowner is actively negotiating a Short Sale or Deed in Lieu of foreclosure with their Servicer.

When you apply for a mortgage, you will need to provide your lender with a number of financial documents. Having these documents already assembled will help accelerate the processing of your loan application. At a minimum, you should be prepared to provide your last two pay stubs, your most recent W-2, your last two years of tax returns, and current bank and brokerage statements.

Start by asking someone you know who has recently gotten a mortgage to see if they would recommend their lender. Ask a financial adviser, business colleague or real estate agent you know to help you write a short list of referrals. An agent should be able to provide you at least two options. Anything less, and you might question whether there’s a financial interest in the relationship between the agent and the mortgage company they suggest. Often national lenders referred by agents end up offering higher interest rates when compared to local mortgage companies.


If you put less than 20% down on your mortgage, you'll probably have to pay private mortgage insurance, or PMI, so be sure to budget for this when shopping. Mortgage insurance rates can vary significantly, depending on your credit, the length of your mortgage, how much your down payment is, and other factors. However, it can add a significant amount to your payment, so be sure to take it into consideration.
However, it's perfectly acceptable to work seller-paid closing costs into your offer in order to reduce your out-of-pocket expense. In other words, if you want to offer $195,000 on a home, you can offer $200,000 and ask the seller to pay up to $5,000 in closing costs for you. This can be an excellent strategy for first-time buyers with limited savings to improve their ability to get a mortgage.
There are cases where your mortgage can factor into your other financial plans, making them more or less attainable. For example, Charlie Donaldson, MBA, College Funding Advisor at College Bound Coaching, says, “The amount of your home equity can count against you when attempting to get financial aid to pay for your child’s college education, potentially costing you tens of thousands of dollars each year your child is in college.”
During dynamic economic periods, interest rate volatility can increase and move mortgage rates quickly. As a mortgage shopper or holder, these periods offer both risks and rewards. For example, you wouldn’t want to lock yourself into an interest rate that drops before the home closing, but you’d welcome a rate lock if rates were on the rise. Some mortgage lenders address this problem by offering rate locks that protect you from rising rates but allow you take advantage of a rate drop before closing.

This website provides general information about Keep Your Home California, its programs and services, and summarizes major policies and guidelines pertaining to foreclosure prevention assistance. Website content does not always reflect the most recent changes to programs or services nor is it intended to be a comprehensive resource for determining program eligibility. Program descriptions are intended to provide a broad overview of current programs and may not include all of the elements considered in the eligibility process. Keep Your Home California reserves the right to change, delete, supplement or otherwise amend, at any time, the information, requirements, policies, procedures and program descriptions contained on this website.
Your credit score. Your credit score is one of the most significant factors in getting approved for a mortgage, and it also influences the interest rate you’ll end up with. The better your score, the lower your rate will likely be and the less you’ll pay in interest. You’re entitled to free credit reports each year from the three major credit bureaus, so request them from annualcreditreport.com and dispute any errors that may be dragging your score down.
You may have heard that you should put 20 percent down when you purchase a home. It’s true that having a large down payment makes it easier to get a mortgage and may even lower your interest rate. But many people have a hard time scraping together a down payment that large. Fortunately, there are many options for homebuyers with little money for a down payment. FHA loans offer down payments as low as 3.5 percent. VA and USDA loans may require no down payment at all.
No. The purpose of the Keep Your Home California Program is to keep struggling homeowners in their home and prevent avoidable foreclosures. This program is not available for second homes or investment properties, which includes using the home as a rental property. If you lease or rent your home after you receive Keep Your Home California assistance you will be ineligible to receive further assistance and may be responsible to repay the benefit proceeds if you sell your home in the future. If during the active benefit period of any Keep Your Home California program it is determined that your home is vacant, non-owner occupied, and/or rented, Keep Your Home California reserves the right to terminate benefit assistance.
Yes, Keep Your Home California will continue to pay Unemployment Mortgage Assistance benefits to a homeowner’s servicer even if the homeowner exhausts their California Employment Development Department benefits, and remain not fully employed, during the time of Unemployment Mortgage Assistance. Keep Your Home California will stop benefit payments if the homeowner becomes fully re-employed or if it determines that the home is listed for sale, the homeowner is renting or no longer occupying the property, or the homeowner is actively negotiating a Short Sale or Deed in Lieu of foreclosure with their Servicer.
With a fixed-rate mortgage, the interest rate will not change over the life of the loan. It's a good choice for someone who likes the certainty of knowing the mortgage payment will never go up. ARMs start with a lower interest rate for the first few years and adjust after a predetermined period (usually five years) based on the housing market. This type of loan can seem risky as interest rates have the potential to rise significantly, but there are caps in place to keep the rates from rising to astronomical levels.
DO THIS: SET UP A QUICK MEETING WITH YOUR LOAN OFFICER TO SEE IF YOU COULD BENEFIT FROM A REFINANCE TO REDUCE YOUR MONTHLY MORTGAGE PAYMENTS. YOU COULD ALSO REFINANCE TO CONSOLIDATE YOUR CREDIT CARD, LOAN, AND OTHER DEBT TO LOWER YOUR INTEREST RATES; TO FINANCE HOME RENOVATIONS OR EXTENSIONS BY USING THE EQUITY ON YOUR EXISTING HOME; OR TO GET A NEW HOME LOAN WITH BETTER FEATURES, LIKE AN OFFSET ACCOUNT OR REDRAW FACILITY.
Sellers often prefer buyers who come with a pre-approval by a lender. This makes their offer more attractive and can help to avoid any problems that may arise down the line. If  you are looking to get a pre-approval, a mortgage broker or bank loan officers will pull your credit and submit any supporting documentation to their automated underwriting system. This allows the bank to give you more accurate loan terms based on your actual credit score, debt obligations, and income. This will also help you to get ahead […]
I find it interesting that many people now a days fail to pay their mortgage. I wish we could balance out this world by pulling very strict regulations on corporations, have a representative democracy, and free schooling [even on college]. That way, any country maintaining life like this would reduce poverty by a huge margin and the wealth distribution would be fair. Life would be very peaceful in a place like this.
Fixed-rate mortgages offer stability in your mortgage payments. However, many ARMs start with a lower interest rate than fixed mortgages and lock the rate in for a few years. That can mean significantly lower payments in the early years of your loan, so some borrowers opt for an ARM with the intention of selling or refinancing their home before the rate can adjust.

Homeowners that are disabled can receive mortgage assistance from the FHFA Home Affordable Refinance Program, HUD housing vouchers, and other resources. Many of these services will be administered as income based programs. The client will normally need to use much of their monthly SSI or SSDI disability payment for paying their mortgage, but if they meet some of the other conditions in place, then additional support can be provided. Find other mortgage assistance for the disabled.
×