Welcome to the Awkward Mortgage Questions, Q&A with your friendly property experts at movetofirstcoast.com. We have your friendly property experts here to answer your awkward mortgage questions. So, without any delays let’s begin with the most common questions that you ever wanted to know about mortgages.

"What is a down payment and how much do I need?"

A down payment is a percentage of the purchase price of a home that you pay upfront when you're taking out a mortgage to buy a house. The rest of the purchase price is financed through the mortgage. In general, you'll need to make a down payment of at least 3.5% of the purchase price of the home to get an FHA loan, which is a type of mortgage that is insured by the Federal Housing Administration (FHA). For other types of mortgages, the required down payment may be varied.

However, the amount of the down payment can also affect the terms of the mortgage, including the interest rate and the monthly payment. A larger down payment may allow you to get a lower interest rate and a lower monthly payment because the lender views you as a lower-risk borrower. It's also worth noting that there are some programs and assistance options available that can help you come up with the money for a down payment, such as grants and down payment assistance programs. These programs may have specific eligibility requirements, so it's worth doing some research and speaking to a lender.

"What is a good credit score for a mortgage?"

A good credit score for a mortgage is one that is high enough to get you a loan with favorable terms. Different lenders have different credit score requirements, and these requirements can also vary based on the type of mortgage you're seeking and other factors.

In general, a credit score of 700 or higher is very good, and it may be enough to get you a mortgage with a competitive interest rate. However, it's worth noting that it is possible to get a mortgage with a lower credit score, especially if you have a high down payment or other compensating factors.  It's also important to keep in mind that having a high credit score is just one factor that lenders consider when evaluating your mortgage application. Other factors that may be considered include your income, your debt-to-income ratio, your employment history, and your savings.  If you're not sure what your credit score is, you can check your credit report for free from each of the three major credit bureaus (Experian, Equifax, and TransUnion) once per year at AnnualCreditReport.com. You can also check your credit score for a fee, or you may be able to get a free credit score through some credit card companies or other organizations.

"What is an adjustable-rate mortgage and is it a good idea?"

An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate is not fixed, but instead adjusts periodically based on an index. The index is a benchmark interest rate that reflects the cost of borrowing money.ARMs typically have a fixed interest rate for an initial period, after which the rate adjusts periodically, usually once a year. The rate can go up or down, depending on market conditions and other factors.

One potential advantage of an ARM is that the initial interest rate may be lower than the rate on a fixed-rate mortgage, which could result in lower monthly payments for the initial period of the loan. This can be especially appealing if you expect your income to increase significantly soon, or if you expect to sell the home before the rate adjusts. However, the main risk of an ARM is that the interest rate can go up significantly over time. If this happens, your monthly payments could become unaffordable, and you might end up having to sell the home or default on the loan. This risk is particularly high if you have an ARM with a long initial fixed-rate period because the rate could adjust significantly after that period ends.

In general, an ARM might be a good idea if you expect to sell the home or refinance the mortgage before the rate adjusts, or if you expect your income to increase significantly in the near future. However, if you expect to keep the home for a long time and you're not sure what the future holds, it might be safer to get a fixed-rate mortgage, so you don't have to worry about the rate adjusting and potentially making your payments unaffordable.

"What is mortgage insurance, and do I need it?"

Mortgage insurance is a type of insurance that protects the lender if the borrower defaults on the mortgage. There are two main types of mortgage insurance: private mortgage insurance (PMI) and mortgage insurance premiums (MIP).

PMI is typically required if you make a down payment of less than 20% of the purchase price of the home when you're taking out a conventional mortgage. PMI is intended to protect the lender, not the borrower, and it is typically paid for by the borrower as a monthly fee. PMI can be cancelled once you have built up enough equity in the home, usually by paying down the mortgage balance or by the home increasing in value.

What is mortgage insurance premium (MIP)? 

Mortgage insurance premium (MIP) is an upfront and annual insurance premium that's required for any Federal Housing Administration (FHA) home loan—regardless of the size of the down payment. It protects the lender in case the borrower defaults on the loan. MIP is also paid for by the borrower as a monthly fee, and it is intended to protect the lender. MIP is usually required for the life of the loan, although it can be cancelled under certain circumstances.

Whether or not you need mortgage insurance depends on the type of mortgage you're getting and the size of your down payment. If you're getting a conventional mortgage and you're making a down payment of less than 20%, you'll probably need PMI. If you're getting an FHA loan or another type of government-insured mortgage, you'll probably need MIP.

If you're not sure whether you need mortgage insurance, you can ask your lender or a mortgage broker for more information. They can help you understand your options and determine whether mortgage insurance is necessary for your situation.

We will continue our discussion over mortgages in the real estate world in our next continued blog. Stay tuned for more updates.