Your Mortgage Questions... Answered!
We took your most commonly asked question regarding the current state of residential mortgage lending to Jason Cook of Brik Mortage. Here's what he had to say.
Q: What are mortgage rates high and rising this year?
While mortgage interest rates are not equal to the rising interest rates the FED is doing, they tend to follow a similar pattern. We are coming out of having the lowest interest rates since World War 2, so mortgage interest rates were eventually bound to go up. Rising inflation and the rapid rise of home prices have contributed to the rise of interest rates. Over the last 20 years, rates have fluctuated between the high 4s and the high 5s. We are back to rates around that point, however, the rapid rise is what has caused many to express concern.
Q: Will mortgage interest rates go down in 2022? A year from now? In 5 years?
I expect interest rates to rise more this year – possibly even hitting the 7s. However, I expect things to settle down with rates falling back into the 5s by next year. As for five years from now, as the last few years tell us, no one can really predict rates that far ahead. No one in 2015 expected for us to be hit with a global pandemic five years later!
Q: What is the difference between FHA and Conventional loans? What are some rates lower than others?
A Conventional loan is a loan that is not part of a specific government program. Most Conventional loans require a 5 percent down payment. There are first-time homebuyer programs that only require 3% down payment. Because these loans are not part of a government program, the rates are typically higher. They require mortgage insurance until the loan amount is 80% of the original purchase price. An FHA loan is a loan from a private lender that is insured and regulated by the Federal Housing Administration (FHA). Because the loan is insured by the FHA, interest rates are typically lower. The minimum down payment required on most FHA loans is 3.5%. Mortgage insurance is also required and remains for the life of the loan.
Q: What is the minimum credit score I need to even consider applying for a mortgage loan?
While some programs can go lower, you would want to have at least a 580 credit score before attempting to get a mortgage. However, at that score, the down payment required might be higher.
Q: If my credit needs work, can you help?
While I can offer tips and guidance for getting your credit score up, I am not a credit counselor or credit repair specialist. Feel free to contact a G3 agent and we can put you in touch with someone who can help!
Q: If I'm buying a home for the first time, what should I know about the mortgage application and approval process?
First, it is okay to shop around for a mortgage. You can have your credit pulled a few times by different lenders within about a three-week period and only have it reflect on your score as one credit pull. You can fill out an application online with most companies and it takes about 15-20 minutes. You will need to supply lenders with your last 2 years' work history and your residence(s) for the last 2 years. To get a full pre-approval, you will need to supply lenders with your last 2 years' tax returns and W-2s, one month’s pay stubs, and 2 months' bank statements. If you are self-employed or commission-based, other documentation may be required.
Q: I've heard people talk about adjustable rate mortgages... what's the difference between that and fixed rate and are they a good idea?
An adjustable-rate mortgage (ARM) is a loan that is a fixed rate for a certain amount of time and then adjusts every 6 months to a year. There are limits to how much the rate can adjust (either up or down). Also, the rate is typically lower than a fixed-rate mortgage. If you are planning on moving again in 3-7 years, an ARM can be a good option to save interest and have a lower monthly payment.
If you're interested in applying for a loan, you can complete an online application here.
Mortgage 205, LLC dba Brik Mortgage, LLC supports Equal Housing Opportunity. NMLS # 2186906 and 2336663