Get informed now. Avoid surprises later.
Be prepared for big decisions
A mortgage loan is possibly the largest financial investment you’ll undertake. Reduce anxiety by understanding the fundamentals.
Most Popular Mortgage Types
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Best for members who:
Best for members who:
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How it works
How it works
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Benefits
Benefits
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Risks
Risks
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Other considerations
Other considerations
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30 Year Fixed Rate
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Best for members who:
Plan to stay at least 6 to 7 years in the home
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How it works
Make the same monthly payment for 360 months
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Benefits
Lower monthly payment; rate stability over life of loan
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Risks
Not many - this is the most popular mortgage in America
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Other considerations
Home equity grows slowly in early years
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15 Year Fixed Rate
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Best for members who:
Can afford a higher monthly payment
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How it works
Make the same monthly payment for 180 months
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Benefits
Lower interest rate significantly reduces total interest paid over life of loan
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Risks
Not many if the higher monthly payments work in the family budget
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Other considerations
Higher payments restrict spending in other areas
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Adjustable Rate (ARM)
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Best for members who:
Plan to stay in home for no more than 3 years.
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How it works
After first year of loan, interest rate is adjusted to market conditions
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Benefits
Lower initial interest rate makes payments more affordable
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Risks
Interest rates & payments can jump year to year. Need to be sure future income will be sufficient
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Other considerations
Most ARM’s include a cap on the increase in any given year
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Balloon Payment
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Best for members who:
Plan to sell home before final payment is due
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How it works
After a specified time, the total balance is due in a single ‘balloon’ payment.
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Benefits
Lower initial interest rate makes payments more affordable
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Risks
Property values fluctuate and you may not be able to sell or refinance on favorable terms
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Other considerations
Most risky mortgage option in an erratic economy
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Before you attend that first open house...
Preparing for a mortgage
- Get prequalified by one or more prospective lenders. This allows you to focus on the correct price range and it will make you a more attractive buyer should there be a bidding situation.
- Review your credit report to make sure all entries are correct. Don’t give up if you’ve had past credit issues. Be ready to offer an explanation of how the situation has been corrected.
How much down payment do I need?
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Conventional Mortgage
Typically 5 to 20%.
Borrowers are required to buy mortgage insurance if their down payment is less than 20%. -
FHA Mortgage
As low at 3.5%. Borrowers are required to buy mortgage insurance if their down payment is less than 20%.
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VA Mortgage
0% down – a great thank you to those who have served.
How much mortgage can I afford?
A good rule of thumb is that your housing costs (mortgage + taxes + insurance) should not exceed 28% of your total pre-tax income.
For example:
- Assume a monthly pre-tax income of $4,000
- Multiply $4,000 by .28
- The result is $1,120 monthly for housing costs.
- Then use our How Much Home Can I Afford? calculator below
Mortgage Calculators
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