Mortgage Options in 2021

This year has presented opportunities for aspiring first-time homebuyers as well as homeowners interested in refinancing. Rates have not been this low since 2012, which means there are many mortgage options in 2021. There are numerous reasons why a person would want to take out a mortgage. A mortgage is a major purchase and it is something that can’t be changed once it has been done. It can be very stressful when looking for the right mortgage, and there are some things that you should consider before taking out a mortgage. It’s in the interest of aspiring potential homeowners to take a look at new quotes. This way, they can determine how they stand to benefit from recent changes in the housing market.

What is a Mortgage?

Mortgages are loan programs that are specifically created to help borrowers purchase a home. Because most people don’t have hundreds of thousands of dollars on-hand, a mortgage loan covers the cost of the home. It allows the borrower to make payments over a long period, usually 15-30 years, depending on the loan type.

How Do Mortgages Work?

Mortgage loans cover the cost of a home and use that same home as collateral to ensure that the borrower is going to continue paying. This continues until the term of the loan is complete. During the life of the loan, the borrower makes monthly payments (which include interest charged by the lender) each year for the length of the loan. Once the buyer fully pays the loan, they own the home. If the borrower fails to keep up with their monthly mortgage payment, the lender may then claim the property to cover their loss. You should have an idea of what kind of house you want to buy and then decide which kind of mortgage will be best for you. This will help you to get the most from your home loan. You should also know that interest rates are not the only thing that affect your monthly payments; there are other factors that come into play when deciding on a mortgage option.

Types of Mortgages and Refinance Options

There are several different types of loans available to borrowers who fit the required criteria. Each type of mortgage loan may have different interest rates, lengths, and repayment terms.

• General fixed-rate: Fixed-rate loans have their interest rates locked in so that they do not vary throughout the length of the loan. This type protects borrowers from interest rate fluctuation. Fixed-rate loans can be set at 15-year terms or 30-year terms.

• Adjustable-rate: Adjustable rate mortgages have a fixed rate for a short period. After this period, the rate may fluctuate. If rates drop, the borrower will pay a lower interest rate. If rates rise, the borrower will pay higher interest rates (though the higher rates cap at a certain amount).

• FHA Loans/USDA Loans: Government agencies back this type of loan. An FHA-insured mortgage usually requires low or even no down payment. They’re designed for borrowers looking to purchase their first home. Low-income individuals who may not have the funds to cover standard mortgage loans may also apply for an FHA-insured loan.

• VA Loans: VA loans are available for individuals who have served in the military. The Department of Veteran Affairs guarantees these loans. Individuals who fulfil the loan qualifications do not have to have a down payment, nor do they have to pay for mortgage insurance. They are also more lenient regarding debt ratio and credit score requirements.
• Freddie Mac Loans: Freddie Mac loans are made available by the Federal Home Loan Mortgage Corporation. These loans are not guaranteed by the government, but they do have government backing. Freddie Mac offers these loans to people who have a low income and can’t afford a standard mortgage loan.
• Fannie Mae Loans: Fannie Mae loans are another type of privately-held, government-backed mortgages. This is a low–down payment loan for people who have little or no savings. The difference between Freddie Mac and Fannie Mae loans is that Fannie Mae sources their mortgages from large commercial banks, while Freddie Mac sources theirs from much smaller banks.

Hidden Lender Fees to Look Out For

When looking for a mortgage, you should also be aware of hidden lender fees. These are fees that are not necessarily listed on the mortgage statement. There are a few different types of hidden fees.

1. Appraisal and Inspection Fee

This fee is not required, but it may be included. It covers the cost of having a property appraised and inspected by a real estate agent.

2. Loan Application Fee

Another type of hidden fee is an application fee. This is charged by the mortgage company when you apply for a loan, and it can range from $50-$1,000 or more. There may also be an appraisal fee and closing costs, which are fees associated with the closing of your loan.

3. Loan Origination Fee

The lender will also charge a loan origination fee. This is a fee that is paid to the lender when you apply for a loan, giving the lender the “go ahead” to begin processing your loan.

4. Private Mortgage Insurance (PMI)

This fee is charged by the lender to cover the cost of covering any mortgage payments if you do not have enough in your savings account to cover them. This insurance is paid by the borrower over a period of time, and it may be required if you have less than 20% down on your home.

5. Homeowners Insurance

Potential homeowners are required to have homeowners insurance. This covers any damage that may occur to your home or belongings.

6. Lender’s Title and Escrow Fees

These fees are charged by the lender to handle all aspects of closing on a property, including title transfer and escrow services. This fee is usually not included in the monthly payment but will be included in the total interest paid over the life of the loan.

What to Know About Mortgage Forbearance

Mortgage payment forbearance is a way to get payment relief on your mortgages. More specifically, forbearance is the ability to temporarily suspend mortgage payments. When the eligible borrower is able to make their monthly payments again, they can resume paying the full amount. If you need to take a break from making payments on your mortgage, you may be legible for one of these options. You may qualify for a forbearance period if you:

• Are unable to make payments due to a serious illness or injury.
• Are unemployed or underemployed and unable to pay your mortgage.
• Are in danger of losing your home because of the loss of income, financial hardship, and/or inability to keep up with mortgage payments.
• You have a federally backed mortgage, including HUD/FHA, VA, USDA, Fannie Mae, and Freddie Mac loans.

To have a forbearance plan, you will need to submit a letter of hardship and meet certain requirements. There are specific forms that must be filled out and then approved by the lender. Keep in mind that you should should only apply for forbearance if you are in dire financial straits and can prove that your situation is temporary. The length of time you can be on extended forbearance may also depend on your situation. The average length of period is about a quarter to half a year, though you may be able to stay on forbearance for up to 12 months. If you qualify, the lender will set up an agreement with you that outlines the loss mitigation options and conditions under which you can take a break from making payments. The mortgage payment forbearance agreement may also include additional payment amounts if you are able to pay them over time. There are different types of forbearance options available to borrowers, based on which mortgage lenders are going to be backing your period of forbearance. These options for extended forbearance may have different requirements, application deadlines, length of period, and other details, so it is highly advisable that you talk to the respective lenders in this matter before you halt mortgage payments (if backed by VA, talk to your VA-approved lender, and if backed by FHA, talk to your FHA-approved lender).

Final Thoughts

Mortgages are important financial obligations that homeowners and aspiring homeowners need to take seriously. The mortgage industry has changed over the years, but there are many different types of mortgages available today. So, it is important to research these options before you apply for a mortgage. If you’re interested in discovering the mortgage options in 2021, requesting a quote is quick, easy, and hassle-free. When you’re ready to get started, you can easily find a handy mortgage finder tool out there to see all of the different types of mortgages available today. Last but not least, lenders will examine your credit score, so make sure to resolve debt and raise your credit score as well.