If you own the lot upon which your home will be built, its appraised value will be considered part of the downpayment. Be certain you understand the builder's contract regarding potential refund of your downpayment. Closing Costs - Charges associated with the transfer of ownership make up your closing costs. They are often estimated at 2 to 3 percent of the loan amount but can vary from state to state. If the interest rate on a mortgage can be changed, the mortgage is an adjustable rate mortgage.
ARMs are easier to qualify for because their initial low interest rate results in a lower payment.
Rate caps limit how much the interest rate can change at one time and over the life of the loan. Balloon Mortgage - Some lenders offer loans that mature before the loan is fully amortized. For instance a 7-23 loan comes due after 7 years, but it may have an option to renew for 23 additional years at a predetermined rate if the borrower meets certain requirements. Origination Fee - Lenders typically charge an origination fee. This fee pays the lender for the services of the loan officer and staff who process your loan application.