Mortgage Resources

A mortgage rate is the interest charged by the lender on the amount you borrow to buy a home. It’s expressed as a percentage of the total loan amount. The rate can be fixed, meaning it stays the same for the life of the loan, or adjustable, which means it can change over time based on market conditions. The higher the rate, the more you pay over the term of your mortgage.

To get a mortgage, you first apply by providing financial details, such as your income, credit score, and debts. The lender reviews this information to determine if you qualify and how much you can borrow. If you're approved, the lender will offer you a loan with specific terms, like the interest rate and repayment period. You’ll review the offer, sign the necessary documents, and the lender will provide the funds to complete the purchase. This process, known as closing, typically takes several weeks.

A down payment is the portion of the home’s price that you pay upfront. The amount typically ranges from 3% to 20% of the home’s price, depending on the type of loan and your financial situation. A larger down payment reduces the amount you need to borrow, can lower your monthly payments, and may also eliminate the need for private mortgage insurance (PMI).

The interest rate is the cost of borrowing money, shown as a percentage of the loan amount. The APR (Annual Percentage Rate) includes the interest rate plus additional costs and fees, such as closing costs or loan origination fees. The APR gives you a more accurate picture of the total cost of the loan over the course of a year, making it easier to compare different mortgage offers.

An escrow analysis, also known as a tax and insurance account disclosure statement, evaluates your escrow account to ensure there’s enough money to cover your real estate taxes and home insurance premiums. It reviews the previous year’s escrow account history and compares the expected account activity with the actual transactions. The analysis also projects the next year's escrow payments and disbursements.

A Tax and Insurance (T&I) payment is the part of your monthly mortgage payment that goes into an escrow account. This money is used to pay your property taxes and homeowners insurance when they are due. By paying a little bit each month, your lender ensures there is enough money in the escrow account to cover these bills without requiring you to pay them all at once.

Your T&I payment can change if your property taxes or homeowners’ insurance premiums go up or down. Since these costs are paid from your escrow account, any increase or decrease in taxes or insurance will affect the amount you need to pay each month. If the total cost goes up, your payment will increase. If the total goes down, your payment will decrease. Be sure to update any automatic payments if the amount changes.

A cushion is extra money set aside in your escrow account to make sure there’s enough to cover your real estate taxes and home insurance. It’s usually equal to one month of these payments, but sometimes your lender may require up to two months' worth. This cushion does not include private mortgage insurance (PMI) if you have it.

The minimum balance, or low point, is the smallest amount of money your escrow account is expected to have during the year. You can find it on the projection page of your "tax and insurance account disclosure statement," and it's usually marked with two asterisks (**). This balance shows the lowest your account should go while still having enough to cover your real estate taxes and home insurance.

The required balance projection is an estimate of the lowest balance your escrow account will reach throughout the year. It’s calculated by adding up your projected monthly Tax and Insurance (T&I) payments and subtracting the projected T&I disbursements for property taxes and insurance premiums. The starting balance is adjusted based on whether the lowest projected balance meets the cushion requirement. If the balance is lower than the required cushion (typically one or two months of T&I payments), money will be added to the starting balance. If the balance is higher than the cushion amount, money will be subtracted.

Conditional approval means that your mortgage application has been reviewed, and the lender is likely to approve your loan, but certain conditions need to be met first. These conditions could include providing extra documentation, verifying income, or meeting specific requirements. Once these conditions are satisfied, the loan can move forward

Pre-qualification is an estimate of how much you might be able to borrow based on basic financial information you provide, like your income and credit score. It’s a rough idea, not a formal approval. Pre-approval, on the other hand, is a more detailed process where the lender checks your financial records, like your credit report and employment, to give you an official loan amount you’re approved for. Pre-approval carries more weight when making an offer on a home.

The credit score you need depends on the type of loan and the lender’s requirements, but typically, a score of 620 or higher is needed to qualify for most conventional mortgages. Some government-backed loans, like FHA loans, may accept lower scores, starting around 580.

To apply for a mortgage, you’ll need several key documents, including proof of income (like pay stubs or tax returns), bank statements, employment verification, and information about your debts and assets. You may also need a credit report and identification documents like your driver's license.

If you miss a mortgage payment, you may face late fees and risk damage to your credit score. If the payment isn’t made within 30 days, it could be reported to credit agencies, impacting your ability to borrow in the future. If you continue to miss payments, you risk foreclosure, where the lender takes possession of your home.

o Michigan’s Property Tax Homestead Exemption reduces the amount of property taxes homeowners pay on their primary residence. If you qualify, this can lower your property taxes, which can reduce the amount you need to set aside in your escrow account for tax payments. It doesn’t affect your mortgage directly, but it can lower your overall housing costs.

Yes, Michigan offers several programs for first-time homebuyers. For example, the Michigan State Housing Development Authority (MSHDA) provides down payment assistance, lower interest rates, and special loan options. These programs can make buying a home more affordable if you qualify.