All About Getting a Mortgage
How do I know how much of a house payment I can afford? How do I know which type of mortgage is best for me? What does my mortgage payment include? How much cash will I need to purchase a home? What are Annual Real Estate Taxes? What is Annual Homeowners Insurance? What is Private Mortgage Insurance (PMI)?
How do I know how much of a house payment I can afford?
Generally speaking, you can purchase a home with a value of two or three times your annual household income. The amount that you can borrow will also depend upon your employment history, credit history, current savings, debts, and the amount of down payment you are able to make. You may also be eligible for special loan programs for first time home buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford.
How do I know which type of mortgage is best for me?
We offer a variety of home loans to fit your budget and your needs. Below are the financing options we provide:
Conventional : 10, 15, 20 or 30 Year -Fixed Rate
The advantage of a conventional mortgage is if you can afford a 20 percent down payment, you will not have to pay Private Mortgage Insurance for the life of the loan like many of the other financing options. If Private Mortgage Insurance is required, once you have paid your mortgage to below 80% of your home's value you may request a review to remove the Private Mortgage Insurance from your monthly payment. The review may require for you to pay for a new appraisal to ensure that you are below 80% of your home's value. Low down payment options include 3, 5, 10, and 15 percent down.
Federal Housing Administration (FHA): 15 or 30 Year -Fixed Rate
A FHA loan is a mortgage that is insured by the Federal Housing Administration. FHA loans offers down payment options as low as 3.5%. Private Mortgage Insurance will be required for the life of the loan. The Private Mortgage Insurance requirements are also higher than a conventional mortgage loan so the rates vary from what is provided in our Mortgage Calculator Guide.
Veteran Administration (VA): 15 or 30 Year -Fixed Rate
A VA loan is a home loan option available to veterans. The VA loan offers low down payment options as low a 0%. A VA loan doesn't require Private Mortgage Insurance, however, an upfront funding fee is required that varies depending on what the borrower is willing to put down.
U.S. Dept of Agriculture Rural Development (RDL): 30 Year -Fixed Rate
A RD loan is an option for low to moderate income borrowers. It allows borrowers to obtain primary residence in a qualified RDL area. Check eligible addresses here. RDL loans offer a no down payment option for the borrower, but do have alternate Mortgage Insurance requirements that are higher than a conventional mortgage loan, so the rates will vary and are higher than what is provided in our Mortgage Calculator Guide.
Idaho Housing offers a low down payment and closing cost assistance to buyers with good credit. IHFA down payments can be as low as 3%. Private Mortgage Insurance will be required for the life of the loan. The Private Mortgage Insurance requirements are also higher than a conventional mortgage loan so the rates will vary from what is provided in our Mortgage Calculator Guide.
What does my mortgage payment include?
For most homeowners, the monthly mortgage payments include four separate parts:
- Principal: Repayment on the amount borrowed.
- Interest: Payment to the lender for the amount borrowed.
- Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
- Private Mortgage Insurance (PMI): Insurance protecting the lender against a loss in the event the Homeowner defaults on payments.
How much cash will I need to purchase a home?
- Earnest Money: The deposit that is supplied when you make an offer on the house.
- Down Payment: A percentage of the cost of the home that is due at settlement.
- Closing Costs: Costs associated with processing paperwork to purchase or refinance a house.
What are Annual Real Estate taxes?
We will collect your annual real estate taxes as part of your monthly payment and deposit them into what is referred to as an Escrow Account. The county bills us directly once we provide them with the notice that we are holding an Escrow Account for their payment. Your real estate taxes are paid in two increments, mid-year and at the end of the year which we will pay directly from your Escrow Account.
Occasionally, your real estate taxes will be increased by the county. If your property taxes have been increased by the county, we will have to increase the amount of your monthly escrow payment. Likewise, if your real estate taxes decrease, the amount of your monthly Escrow Account will also be decreased. Your Escrow Account is reviewed annually to ensure we are collecting the proper amount.
County real estate taxes vary widely from county to county. If you are buying a new home the amount for taxes is often known by the owner, realtor, or is listed on the NMLS listing. Our Mortgage Calculator Guide can be used as an estimate if the real estate taxes are unknown.
What is Annual Homeowners Insurance?
We will collect your annual homeowners insurance as part of your monthly payment and deposit them into what is referred to as an Escrow Account. Your insurance company will bill us directly once we provide them with the notice that we are holding an Escrow Account for their payment. Your homeowners insurance will be paid annually from your escrow account.
Occasionally, your homeowners insurance will be increased by your insurance provider. If your homeowners insurance is increased, we will have to increase the amount of your monthly escrow payment. Likewise, if your homeowners insurance decreases, we will decrease the amount of your monthly escrow payment. Your escrow account is reviewed annually to ensure we are collecting the proper amount.
Homeowners insurance varies widely based on the insurance provider, type of home, and where the home is located. If you are buying a new home, the current home owner or realtor may have an idea of what is currently paid for homeowners insurance. If the homeowners insurance is unknown, our Mortgage Calculator Guide can be used as an estimate.
What is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance is typically required on all mortgages when the amount financed is greater than 80% of the purchase price of the home. PMI is based on many factors including the amount of your down payment i.e. 3%, 5%, 10%, 15%. You can use our Mortgage Calculator Guide as a general estimate of how much your PMI might be. The higher the down payment you can afford will reduce the amount of the monthly PMI. Your PMI will also vary according to your FICO credit score and loan term. The table provided in the Mortgage Calculator Guide are estimates based on credit score ranges and a 30 year conventional mortgage. If your credit score is lower, your premium will be higher. Likewise, if your loan term is 15 years, the monthly PMI will be less. This detail may be discussed with your loan officer after you apply.
Keep in mind that mortgage loans have different down payment requirements depending on whether it is conventional or a government sponsored program, i.e. FHA, VA RDL , IHFA. etc. Refer to How Do I Know Which Type of Mortgage is Best for Me?