Mortgage

Fixed-rate mortgage: • Your interest rate stays the same for the entire loan term (15, 20 or 30 years). • Monthly payment is predictable — great for budgeting. • Best when current rates are low or you plan to stay long-term. • Common terms: 30-year fixed (most popular), 15-year fixed (higher payments, less total interest). Adjustable-rate mortgage (ARM): • Your rate is fixed for an initial period (e.g., 5 or 7 years), then adjusts annually based on market index. • Often starts lower than fixed rates, but carries risk if rates rise significantly. • Best for buyers who plan to sell or refinance before the adjustment period begins. • Common: 5/1 ARM (fixed for 5 years, adjusts annually after). Example: On a $400,000 loan, a 30-year fixed at 6.5% gives a $2,528/month principal + interest payment. A 5/1 ARM starting at 5.5% gives $2,271/month — but could rise significantly after year 5.

Minimum credit scores by loan type: • Conventional loan — 620 minimum; 740+ gets the best rates • FHA loan — 580 with 3.5% down; 500–579 with 10% down • VA loan (veterans) — no official minimum, but most lenders want 620+ • USDA loan (rural areas) — typically 640+ How credit score affects your rate: Even a 40-point difference in score can change your rate significantly. On a $350,000 loan: • 760+ score: 6.25% rate → $2,155/month • 680–699 score: 6.75% rate → $2,270/month • That's $115/month more, or $41,400 over 30 years. Improving your score before applying: 1. Pay down credit card balances (keep utilization below 30%) 2. Don't open new credit accounts for 6 months before applying 3. Dispute any errors on your credit report 4. Pay all bills on time — payment history is 35% of your score

Private Mortgage Insurance (PMI) is insurance that protects the lender (not you) if you default on a conventional loan. It's required when you put down less than 20%. Cost: Typically 0.2–2% of the loan amount per year. On a $350,000 loan, that's $700–$7,000 per year, or $58–$583/month added to your payment. How to avoid or remove PMI: 1. Put 20% down — eliminates PMI entirely from day one 2. Lender-paid PMI — the lender covers PMI in exchange for a slightly higher interest rate 3. Piggyback loan (80/10/10) — you take a first mortgage for 80%, a second for 10%, and put 10% down 4. Build equity to 20% — for conventional loans, you can request PMI removal once you reach 20% equity; it automatically cancels at 22% (by law) FHA loans have mortgage insurance premiums (MIP) for the life of the loan (if you put less than 10% down), making conventional loans often preferable once you have 10%+ to put down.

Pre-qualification: • A quick, informal estimate of how much you might be able to borrow • Based on self-reported information (income, debts, assets) • No credit check, no document verification • Takes 1–3 minutes online or by phone • Not taken seriously by sellers in competitive markets Pre-approval: • A formal, verified assessment • Lender reviews pay stubs, tax returns, bank statements and runs a hard credit check • Results in a pre-approval letter stating the exact loan amount • Takes 1–5 business days • Shows sellers you're a qualified, serious buyer For today's competitive market, pre-approval is essentially mandatory before making offers. Some agents won't even show homes without it.

Yes, self-employed borrowers can absolutely get a mortgage — it just requires a bit more documentation. Lenders will typically ask for: • 2 years of personal and business tax returns • Year-to-date profit and loss statement • 2–3 months of bank statements • Business license or CPA letter confirming self-employment Key considerations: • Lenders use your net income (after deductions), not gross revenue. Heavy deductions that reduce your taxable income also reduce the income lenders see. • A 2-year history of self-employment is generally required (some lenders accept 1 year with additional documentation). • Bank statement loans: Some lenders offer loans based on 12–24 months of bank deposits rather than tax returns, though rates are typically higher. Tip: Work with a mortgage broker who specialises in self-employed borrowers — they have access to a wider range of loan products.