Genisys Credit Union Mortgages, Home Loans, & Refinancing

Simply put, a mortgage is a loan used to buy or refinance a property, usually a private home. Often referred to as "home loans" or "mortgage loans", mortgages offer a way to purchase a home without having all the cash upfront. Most people who buy a home do so through a mortgage, as most people don't have the money to pay for the full cost of a mortgage upfront.

Mortgage lenders calculate affordability based on information such as your income, debt expenses and size of down payment. A general guideline for Genisys Mortgage lenders is to keep your monthly housing payment (principal, interest, taxes and insurance) at or below 25 percent of your income before taxes. This debt-to-income ratio is called the "housing ratio".

Lenders also calculate your overall debt to income ratio. It includes all debt commitments, including car loan, student loan and minimum credit card payments, together with your house payment. An overall debt to income ratio of 43 percent or less is preferred.

A traditional down payment is 20% of the purchase price. On a $200,000 home, this means the down payment would be $40,000. With a 20% down payment, mortgage lenders will not require any additional mortgage insurance or charge additional premiums in order to approve the loan. If you are able to put 20 percent down, you will get the lowest costs and fees associated with a mortgage loan.

If you're buying a home with a conventional mortgage loan and your down payment is less than 20% of the purchase price, you will be expected to pay an additional cost: private mortgage insurance (PMI). PMI protects your mortgage lender in the event that you stop making payments on your home loan.

PMI allows a home purchase with as little as 3% - 5% percent down, or $6,000 to $10,000 on a $200,000 home. The rate for PMI will be based on the amount of the down payment and your credit rating. If you can afford a down payment in the 5% -10% range, you should compare FHA and conventional loans to find the lowest cost.

While every individual financial situation is different, your credit score could impact your qualifications for PMI, or at least affect the rate of your down payment and other factors relating to PMI.

Typically speaking, most people qualify for PMI, but the cost of your premiums will be affected by your credit score, with higher credit scores getting lower-cost premiums during the duration of their mortgage. When applying for a mortgage, make sure to discuss your financial situation with your dedicated Genisys Mortgage Consultant to understand your options and find the mortgage that's right for you.

In banking terms, 'interest' is an additional fee charged on your mortgage as part of the risk in issuing your loan. This interest is calculated as a percentage of your mortgage amount, and will add on to the total amount you need to repay over the life of your mortgage, even if it's not factored into the initial purchase price of your home.

Mortgages are typically divided into two categories based on how the interest is calculated: fixed rate or adjustable rate.

A fixed rate mortgage is just that - fixed, not changing. Fixed rate mortgages have an interest rate that remains the same for the term of the loan. With a fixed rate mortgage, you know exactly what you are going to pay each month for the life of the loan. If interest rates drop dramatically, you can always refinance to get a better rate; if interest rates go up, you'll be smart for having locked in a lower rate. Fixed rate mortgages are one of the easiest mortgages to understand and budget for. The most popular terms for a fixed rate mortgage are 15 or 30 years.

One advantage to an adjustable rate mortgage (ARM) is typically they offer a lower initial payment, however, with an adjustable rate mortgage (ARM), your monthly payments can change over time. Oftentimes ARMs have a fixed initial rate for months or years. After that, the interest rate will be adjusted each year. The adjustment will be based on an index specified in the mortgage agreement. If rates stay low with very minimal changes another advantage to an ARM is you could find yourself saving significant money in interest charges.

When you're shopping for mortgages, you'll see ARMs listed as 1/1, 3/1, 5/1 and so on. The first number indicates how many years the initial fixed rate will last. The second number tells you how often the interest rate will be adjusted thereafter. This number is almost always a 1 to indicate an annual adjustment.

While the idea of no longer having a mortgage can be a tempting prospect for some, it may not always make financial sense. Paying your mortgage off early will result in lower interest rates and a lower payment overall, but it can also cause you to dip into your savings or retirement funds to finish your mortgage early - an investment that might not always make sense depending on the amount your interest might cost you, or how much you're spending on your mortgage overall.

If you're considering paying off your mortgage ahead of schedule, consider contacting your Mortgage Consultant to review your financial situation and see what is best for you.