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FAQ
1 What's an FHA mortgage and should I apply for one?
A Federal Housing Administration loan is insured by the federal government and are offered to first-time home owners who would otherwise not be able to afford a home. The advantage is you can put as little as 3.5 percent as down payment, rather than the typical 20 percent.
2 Should you buy points?
Everyone wants the lowest possible interest rate when getting a mortgage. If you want to lower your monthly mortgage payments, lenders will let you “buy down” the rate by paying what are called “discount points.” You pay these points up-front at closing. The more points you pay, the lower the interest rate on your mortgage.
A good rule of thumb is that every point should lower your rate by a quarter of 1 percent.
3What are closing costs?
In a nutshell, closing costs are the fees that have to be paid before you can finalize the purchase of your home. Closing costs are calculated as a percentage of the home’s purchase price and they usually run between 2 and 5 percent.
So for example, if you’re buying a $200,000 home, your closing costs could be anywhere from $4,000 to $10,000.
