Interest rates, prepayment penalties, and down payments are topics that will come up when you are looking for a mortgage.

If you are on the market for a mortgage you will soon find out, if you havent already, that the rates you seen online are only current for that day and sometimes even for just for that hour. The current mortgage rate, as with other interest rates, is constantly changing. When speaking with your broker or lender, be sure to ask about their rate lock policies and confirm that the rate you saw online or on TV is the same rate available today.

In some cases, prime borrowers, those with good credit ratings or high down payments, or both, are offered the choice to accept prepayment penalty option to decrease their interest rate which results in lower monthly payments. If you are extended such an option, it is good to consider the importance of the decrease payment to your finances over time. As most prepayment penalties expire after 3 to 5 years, if you plan on staying in your current loan for more than five years, this could be a viable option! There are two types of prepayment penalties, hard and soft. A hard prepayment penalty must be paid if you refinance or sell your home. A soft penalty must be paid only if you refinance.

When it comes to down payments, a way that lenders can make up for a down payment below 20% of the homes value is by requiring you to pay private mortgage insurance (or PMI). Private mortgage insurance, is required by most lenders when you pay less a Mortgage down payment less than 20 percent and carry the entire balance of your mortgage in one loan worth over 80% of the homes value. PMI protects the lender by paying your Mortgage in the event that you are unable to. The cost of your PMI depends on the amount of the home you purchased and the amount of your down payment. You are able to cancel the insurance once you have gained 20 percent of the Mortgage through your down payment and subsequent Mortgage payments. Additionally, you can avoid PMI entirely by taking a second mortgage to cover the amount you need to borrow above 20% of the homes value.

While these terms and concepts can be confusing, the good news is there are many trained and licensed professionals who can help you navigate the options, choices and features of todays mortgage programs. Be sure to work with someone you feel comfortable with and who does not make you feel rushed. Always remember that this is your transaction and that you dont need to work with anyone who makes you feel uncomfortable as there are many other professionals out there ready and willing to work with you.

Author: Joe Ramirez
Article Source: EzineArticles.com
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