Based upon search engine data, these are five of the most frequently asked mortgage questions:

MORTGAGE ORIGINATION QUESTIONS

Q. How much can I borrow for a mortgage?

A. When answering questions of this type, two major factors must be taken into consideration; the borrower’s monthly income and the amount of money he or she has for a down payment. Most banks expect at least a 20% down payment, although there are some exceptions. It is also important for the borrower to have a reliable monthly income, which can cover the monthly payment and other necessities.

Q. How does a reverse mortgage work?

A. Reverse mortgages are frequently obtained by seniors that have a substantial amount of home equity. They work by converting home equity into monthly cash payments, which the homeowner receives. This can make it easier for a retired person to afford basic expenses, although it will eventually deplete the home’s equity and diminish the value of inheriting it.

Q. What is Private Mortgage Insurance (PMI)?

A. Private Mortgage Insurance is a type of insurance that insures the lending institution against a borrower’s inability to repay the loan. Banks typically require this when the homebuyer doesn’t have a large down payment. In some situations, the borrower pays a monthly fee for PMI. Other mortgages use LPMI, which is similar except that the cost is included in the interest rate.

MORTGAGE PAYMENT QUESTIONS

Q. How do I calculate a mortgage payment?

A. There is no simple formula for calculating monthly payments with sufficient accuracy. It is most effective to use an online, software-based, mortgage calculator, or handheld loan calculator. Booklets of payment calculation tables are also available. To calculate these payments, it is necessary to know the term (number of years), the interest rate, and the amount of money borrowed.

Q. How can I pay off a mortgage fast?

A. If it is affordable for the borrower, refinancing a 30- or 40-year loan term to 15-years will speed up repayment and save money on interest. Another option is to make extra payments, in addition to the normal monthly payment. However, a homeowner who does this should verify that his or her loan does not have a “pre-payment penalty” to discourage early repayment.

If you have questions not answered here, see our other entries for answers to additional frequently asked mortgage questions.