Q: What are the main things someone should be paying attention to when getting a mortgage?
A: There are a lot of areas to pay attention to during the mortgage process, but most people are concerned with what their final monthly payment will be. So the two biggest factors that contribute to that are the size of your down payment and the interest rate you lock in at.
Q: Tell me more about down payments.
A: Essentially, the more money you can use as a down payment the lower your monthly payment will be because you have to borrow that much less for your home loan. You generally want to have at minimum 3-5% of the total cost of the home you’re planning to purchase for a down payment. However, having 20% or more to put down will allow you to avoid Private Mortgage Insurance costs, which can add a significant amount to your monthly payment.
Q: What is Private Mortgage Insurance?
A: With most loans, if you make a down payment of less than 20% of the home's cost, your lender will require private mortgage insurance (PMI). It's a protection for the lender in case you default on your loan. Each lender has different cost structures for this so it’s important to ask your lender what these fees will be. However, they are most often added to your monthly payment.