Mortgages are available through mortgage brokers, banks, credit unions and savings banks. Mortgage brokers originate close to half of all mortgage loans in the United States. Whether you elect to work directly with a lender or through a mortgage broker, it is a good idea to get “pre-qualified.” This will help you definitively ascertain how much you can afford and will give you a competitive advantage with sellers (because you can present them with a document demonstrating that you will be able to pay the amount they are asking).
A conventional mortgage is not insured or guaranteed by the government. Conventional loans with a down payment of less than 20% typically require private mortgage insurance (PMI), which protects the lender if the homeowner defaults on the loan.
The Federal Housing Administration (FHA) offers several low down payment mortgage products for eligible participants. FHA-insured loans are available from most of the same lenders who offer conventional loans. For more information about these loans and eligibility requirements, please contact your lender or visit the Housing and Urban Development website at: hud.gov/fha/loans.cfm.
If you are a veteran of military service, reservist, or on active military duty, you may qualify for a loan guarantee from the Department of Veterans Affairs. These loans typically require minimal down payment.
Adjustable-Rate Mortgages (ARMs)
With an adjustable-rate mortgage, the interest rate changes periodically. They are typically characterized by the amount of time that must pass before the rate can be changed (1, 3, 5, 7 or 10 years, for example). Rates are generally lower than fixed-rate mortgages, but ARMs carry the risk that an increase in interest rates will lead to higher monthly payments. Homebuyers should consider the following before choosing an ARM:
Lenders may or may not require that you have your prospective home inspected by a professional before they approve your mortgage, but it’s a good idea, even if they don’t. Home inspections, which typically cost between $250 and $600, can reveal structural problems that may impact the selling price and/or your interest in the home. They can also help you identify a “to do” list of projects for you to tackle once you have moved in. Home inspectors are licensed by the state.
Under Wisconsin law, building inspectors are liable for damages that arise from an act or omission relating to their inspection. In addition, they are prohibited from performing any repairs, maintenance or improvements on the inspected property for at least two years after the inspection has occurred. They also are prohibited from telling the market value or marketability of a property or whether you should purchase the inspected property. For more information about the state’s home inspection regulations or to check the status of an inspector’s license, please call (877) 617-1565 or visit drl.wi.gov.
Following are financial terms frequently used when buying or selling a home: