What You Need to Know About Mortgages
Chances are you already know something about borrowing money. From car loans to credit cards, the basic concept is the same. When it comes to mortgages though, there is more to consider. This information will help you to better understand and make sense of Mortgage loans and what to expect when you are ready to buy your new home.†
How do I get a Mortgage?
Before you apply, assess your finances to make sure a mortgage is right for you with these 5 Financial Steps. Do some research to find a reputable lender—large financial institutions, credit unions and community banks are all good options, and government Guaranteed Loans. Some lenders, such as Pulte Mortgage, specialize in new construction financing. Learn more by reading Consult the Professionals.
What types of Mortgages are there?
Fixed-rate Mortgages are the standard home loan: You pay a set amount every month and the interest rate never changes. They’re best for homebuyers who plan to stay for a number of years and want predictable payments. A 15-year fixed-rate mortgage usually has lower interest than a 30-year, and best for homebuyers who want to pay off the mortgage quickly, and pay less overall with higher monthly payment. Fixed-rate mortgages are a great opportunity to lock in a low Interest rate and save money over time.
Adjustable-rate Mortgages (ARM) have interest rates that vary based on the market. They’ll often have a Fixed Interest Rate for the first 3, 5 or 7 years, and then adjust annually for the rest of a loan’s duration. These mortgages start with lower interest rates than fixed-rate mortgages, which makes them more appealing, but once the adjustable rate kicks in, your Monthly Payment could go up or down significantly.
What’s in a Monthly Payment?
Your monthly mortgage payment includes an amount paid toward interest and an amount paid toward the Principal. Lenders will often include property tax and homeowner’s insurance in your monthly payment, hold them in an Escrow account and then pay them on your behalf when they’re due. (Those amounts are reassessed annually.) If your loan requires Private Mortgage Insurance (PMI) that will be included in your monthly payment, too.
What are Closing Costs?
Purchasing a home involves a number of services: Appraisal , title services and so on. Those services and their associated fees are usually around 2-3% of the loan amount and are paid up-front at Closing . Your lender will provide you with a Loan Estimate of these costs after you apply for a loan. It is likely your lender may ask you to pay some costs, like the appraisal and loan Application fee, not long after you have paid for financing.