The Characteristics of an Affordable Mortgage Loan

When you borrow money to make a purchase, it is critical that you get the best possible terms. If your interest rate is too high, too much of your payment will go to the lender as opposed to your principal balance. If your down payment or closing costs are too high, you could be house poor as soon as the deal closes. Let’s look at how you can evaluate a home loan to determine how well it meets your needs.

Do You Have to Pay Private Mortgage Insurance?

Private mortgage insurance (PMI) protects the lender if you default on your mortgage. It is usually paid in monthly installments, and the amount of each payment is about 1 percent of the loan amount on an annualized basis. Depending on the amount of your home loan, PMI can cost $100 or more each month. To avoid making this payment, aim to make a down payment of 20 percent or more on your home.

What Types of Fees Is Your Lender Charging?

Lenders may charge document fees, loan processing fees and origination fees. Your lender may also require you to purchase points, which is the equivalent of prepaying interest on the loan. In some cases, companies that offer mortgage products will offer lender credits in exchange for a higher interest rate. Before agreeing to borrow money, be sure that you review all the fees and ask questions about any charges that you don’t understand.

Look at the Overall Cost Instead of the Monthly Payment

When evaluating a loan, make sure that you look at its overall cost instead of just looking at the monthly payment. While it is important that you can afford your monthly housing costs, your goal is to pay a fair market price for your home. The best loan officer in Las Vegas or another mortgage broker may be able to help you evaluate a loan offer.