Mortgages For Dummies

If you own or want to own real estate, you need to understand mortgages. Unfortunately for most of us, the mortgage field is jammed with jargon and fraught with fiscal pitfalls. For typical homeowners, the monthly mortgage payment is either their largest or, after income taxes, second largest expense item. When you’re shopping for a mortgage, you could easily waste many hours and suffer financial losses by not getting the best loan that you can. Our goal is to make you as knowledgeable as possible before you commit to a particular mortgage, so to help you get started here are few tips and a monthly payment calculator to get you acquainted with mortgages

Copyright © 2008 Eric Tyson and Ray Brown All rights reserved.

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Eric and Ray’s Top Tips for Borrowers

• Before you get a mortgage, be sure you understand your personal financial situation. The amount of money a banker is willing to lend you isn’t necessarily the amount you can “afford” to borrow given your financial goals and current situation.

  
  



• Maximize your chances for getting the mortgage you want the first time you apply by understanding how lenders evaluate your creditworthiness. Don’t waste time and money on loans that end up rejected. Most obstacles to mortgage qualification can and should be overcome prior to submitting a loan application.

  
  



• Because the ocean of mortgage programs is bordered with reefs of jargon, learn loan lingo before you begin your mortgage-shopping voyage. This will enable you to hook the best loan and avoid being taken in by loan sharks.

  
  



• To select the best type of fixed-rate or adjustable-rate mortgage for your situation, clarify two important issues. How long do you expect to keep the loan? How much financial risk are you able to accept?

  
  



• Special situation loans — such as a home equity loan or 80-10-10 financing — could be just what you need. However, some “special” loans, such as 100 percent loans and balloon loans, can be toxic.

  
  



• Whether you do it yourself or hire a mortgage broker to shop for you, canvas a variety of lenders when seeking the best mortgage. Be sure to shop not only for a low-cost loan but also for lenders that provide a high level of service.

  
  



• Investigate when shopping for a mortgage on the Internet. Be cautious. You may save time and money. Or you could end up with aggravation and a worse loan.

  
  



• Compare various lenders’ mortgage programs and understand the myriad costs and features associated with each loan.

  
  



• Just as you must prepare a compelling resume as the first step to securing a job you want, craft a positive, truthful mortgage application as a key to getting the loan you want.

  
  



• After you get a mortgage to purchase a home, stay informed about interest rates, because a drop in rates could provide a money-saving opportunity. Refinancing — that is, obtaining a new mortgage to replace an existing one — can save you big money. Assess how long it will take you to recoup your out-of-pocket refinance costs.

  
  



• If you’re among the increasing number of homeowners who reach retirement with insufficient assets for their golden years, carefully consider a reverse mortgage, which enables older homeowners to tap their home’s equity. Reverse mortgages are more complicated to understand than traditional mortgages.

  
  



• If you fall on tough economic times and get behind on your housing payments, don’t resign yourself to foreclosure. Take stock of the situation. Review your spending and debts and begin a dialogue with your lender to find a solution. Make use of low-cost counseling approved by the United States Department of Housing and Urban Development.

  
  

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Mortgage Payment Calculator

To calculate your monthly mortgage payment, simply multiply the relevant number from the table below by the size of your mortgage expressed in (divided by) thousands of dollars. For example, on a 30-year mortgage of $125,000 at 7.5 percent, you multiply 125 by 7.00 (from the table) to come up with an $875 monthly payment.

Interest Rate (%)	Term of Mortgage
	15 years	30 years
4	7.40	4.77
4-1/8	7.46	4.85
4-1/4	7.52	4.92
4-3/8	7.59	4.99
4-1/2	7.65	5.07
4-5/8	7.71	5.14
4-3/4	7.78	5.22
4-7/8	7.84	5.29
5	7.91	5.37
5-1/8	7.98	5.45
5-1/4	8.04	5.53
5-3/8	8.11	5.60
5-1/2	8.18	5.68
5-5/8	8.24	5.76
5-3/4	8.31	5.84
5-7/8	8.38	5.92
6	8.44	6.00
6-1/8	8.51	6.08
6-1/4	8.58	6.16
6-3/8	8.65	6.24
6-1/2	8.72	6.33
6-5/8	8.78	6.41
6-3/4	8.85	6.49
6 -/8	8.92	6.57
7	8.99	6.66
7-1/8	9.06	6.74
7-1/4	9.13	6.83
7-3/8	9.20	6.91
7-1/2	9.28	7.00
7-5/8	9.35	7.08
7-3/4	9.42	7.17
7-7/8	9.49	7.26
8	9.56	7.34
8-1/8	9.63	7.43
8-1/4	9.71	7.52
8-3/8	9.78	7.61
8-1/2	9.85	7.69
8-5/8	9.93	7.78
8-3/4	10.00	7.87
8-7/8	10.07	7.96
9	10.15	8.05
9-1/8	10.22	8.14
9-1/4	10.30	8.23
9-3/8	10.37	8.32
9-1/2	10.45	8.41
9-5/8	10.52	8.50
9-3/4	10.60	8.60
9-7/8	10.67	8.69
10	10.75	8.78
10-1/8	10.83	8.87
10-1/4	10.90	8.97
10-3/8	10.98	9.06
10-1/2	11.06	9.15
10-5/8	11.14	9.25
10-3/4	11.21	9.34
10-7/8	11.29	9.43
11	11.37	9.53
11-1/4	11.53	9.72
11-1/2	11.69	9.91
11-3/4	11.85	10.10
12	12.01	10.29
12-1/4	12.17	10.48
12-1/2	12.17	10.48

*Warning: Mortgage payments are only a portion of the costs of owning a home.

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