Mortgages

About

NOTE: This page is a daughter page of: Home Buying

I'm hoping to buy a home in 2022, I decided to revisit some old notes and also write some new notes about morgage options in the United States. There are those notes.

PITI

• P = Principle ... For a 1.5 M home... 20% down (300k)... principle is a 1.2M loan.
• I = Interest ... The per annum (but paid monthly) interest rate you pay on the remaining principle.
• T = Taxes ... Usually rolled into mortgage payment.
• I = Insurance ... Property insurance is paid monthly... and if you don't do 20% down, then you'll probably do the more expensive Private Morgage Insurnace (PMI)

Types of Mortgages

These are the main "types" of morgages:

1. Fixed Rate {Comment}}... "conventional" most popular/default 30 years, but sometimes 15, 10 or 20 years - interest rate never changes obviously
2. Adjustable Rate (ARM) - {Comment}}... fixed for a particular number of years, so 5/1 = first 5 years fixed then adjusts annually after that, or 5/5 = first 5 years fixed then adjusts every 5 years after that... best for people who won't live there long or expect interest rates to go down. Often less than a fixed rate & could also refinance.
3. FHA - {Comment}}... allows people do just 3% down, for people who low credit scores and/or less than 20% to invest, and has PMI. < N/A.
4. VH (Veteran) - {Comment}}... veterans only can do with 0%, but higher mortgage.
5. USDA - {Comment}}... US Department of Agriculture with 0%, but more for rural areas, very specific. < N/A.
6. Jumbo Loan - {Comment}}... for large loans, near or over a million.

Tips For Morgages & Buying a Home

• Talk to a lender before looking at apartments: know if you can get a loan and approved for how much.
• For many 30 years loans... you might be paying more on interest than you are on principle for the first 6 years! For 20 years loans, you might be paying more towards principle on day one. You want to know these numbers.
• Good rule of thumb: no more than 25% of your take home pay on mortgage payments - {Comment}}... so if you get paid 180k a year, that's 12k a month, but your take home (paychecks after tax deductions) might be just 8k... and so try not to exceed 2k a month in payments.
• Warnings
  • A lender is not a financial planer - they will always tell you to buy.
  • Average contract is 30 days.
  • Only you can decide your budget.
• Know your up-front payments:
  • Out of pocket... usually at least $500 for a home inspection, which you lose, even if you don't buy.
  • Aside from downpayment, closing costs are 2-4% of purchase price.
• Be clear why you are buying: a want or need.
• There are three types of lending institutes, each a little different and works best if you get a referral:
  1. Broker
  2. Local Bank or CU
  3. Big/Online Lender
• Get first ballpark rate estimate via CFPB rate checker.

CFPB rate checker, using San Francisco May 2022 as an example.

• Read the First Time Home Buyers Guide and watch the video!

Videos

• The Ultimate First Time Home Buyser Guide 2021 - great overview, great video, and is where I got many of my "tips" from.
• Home Mortgages 101 (For First Time Home Buyers) - good overview, but doesn't cover jumbo.
• Jumbo Loans With 3.5 Down | Loan Options Available To You

Acknowledgements: Natalya for inspring me to look into buy a place.