Mortgage FAQ's | Carolyn Carpenter-Hawkins

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Below are some frequently asked questions (FAQs) related to mortgages:

1. What is a mortgage?
– A mortgage is a loan specifically used to purchase real estate, usually a home. The property itself serves as collateral for the loan.

2. How does a mortgage work?
– A borrower obtains a mortgage from a lender to buy a home. The borrower makes regular payments, typically monthly, to repay the loan, consisting of both principal and interest.

3. What is the down payment, and how does it affect the mortgage?
– The down payment is an initial, upfront payment made by the buyer. A larger down payment often results in a lower loan amount and, consequently, lower monthly payments.

4. What is the difference between a fixed-rate and an adjustable-rate mortgage (ARM)?
– A fixed-rate mortgage has a constant interest rate and monthly payments throughout the loan term. An ARM has an interest rate that may change periodically, affecting the monthly payment.

5. How is mortgage interest calculated?
– Mortgage interest is typically calculated based on the remaining loan balance. In the early years, more of the payment goes toward interest, gradually shifting to more principal repayment over time.

6. What is a pre-approval for a mortgage?
– Pre-approval is a process where a lender assesses your financial information and creditworthiness to provide an estimate of how much you can borrow. It helps homebuyers understand their budget and strengthens their offer.

7. What is Private Mortgage Insurance (PMI)?
– PMI is a type of insurance that lenders often require if the borrower’s down payment is less than 20% of the home’s purchase price. It protects the lender in case of borrower default.

8. Can I pay off my mortgage early?
– Yes, many mortgages allow for early repayment without penalties. Be sure to check your loan terms and consult with your lender.

9. What is a home appraisal, and why is it necessary?
– A home appraisal is an assessment of a property’s value conducted by a professional appraiser. Lenders require appraisals to ensure the property’s value is sufficient to support the loan amount.

10. What happens if I miss a mortgage payment?
– Missing a mortgage payment can lead to late fees and negatively impact your credit score. It’s important to communicate with your lender if you’re facing financial difficulties to explore potential solutions.

Remember, specific details may vary based on your location and the terms of your mortgage agreement. Always consult with a qualified professional for personalized advice related to your situation.

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