Downpayments

Most lenders will require a down payment. This could range up to 20% or more of the home's purchase price. If a 20% down payment is not made, lenders usually require you to obtain private mortgage insurance (PMI). PMI protects the lender if the homebuyer fails to pay. You also may be able to obtain mortgages through the Federal Housing Administration (FHA) or the Department of Veteran Affairs. Usually these mortgages have lower rates than a bank or other lenders will give to you. When you obtain of these mortgages, the down payments are significantly less. Ask about a lender's down payment requirements. If PMI is needed for your loan, ask about its availability, its total cost, how long you will be required to carry PMI, and what your monthly payment will be when including the PMI premium to your interest rate.

If you are shopping for a new home, one way to ease the transition into a new home is to get a pre-approved mortgage (to get a free quote click here). This method allows you to have a good estimate of the mortgage amount that you can receive. With this estimate, you should be able to move more quickly upon a house that has just gone on the market. Also, by having this deal already done, you may be able to negotiate with the seller better if they are in a hurry to sell. Pre-approved mortgages, however, are not completely binding deals. The lender must still appraise the house that you are buying before you are granted the loan. This may or may not change the APR that you incur. By having this pre-approved loan more times than not, you will have a much easier transition into the new house for the simple reason that the seller will be more comfortable and confident in working with you.

Look for the following:

1. Lowest possible rate
2. Prepayments - none or a low amount
3. Smallest downpayment
4. Least possible closing cost
5. Balloon payments - a large payment at the end of the loan
6. What index is used in variable interest payment situations
7. The loss of equity that would result if you miss or only partially pay a payment
8. Any interest rate provisions that increase your interest payments if you miss a payment
9. How long will you be making payments
10. What penalties are there for paying off the loan before you are required to.
11. Any insurance required for the loan.