Getting financing is the most important piece in the path to home ownership.
Before contacting a real estate agent, your first call should be to a qualified lender to find out what types of loan options are available, which ones you qualify for, and most importantly, to find out how much house you can afford. During this time you should also be learning some mortgage fundamentals.
What Is a Mortgage?
A mortgage is a loan that is using property or a home as collateral. It is absolutely necessary unless you have the cash for the full purchase price. You essentially are promising the lender that you will be making small monthly payments to help pay that loan back. If you fail to do this, they have the right to seize the collateral, which is the house. That is what is known as a foreclosure.
How Much Will the Monthly Payment Be?
That depends entirely on the amount of the home loan and the terms that you secured; expect it to consist of four separate things:
- The principal, which is the amount of money that you borrowed.
- Interest payments, which are the fees charged to you by the lender for allowing you to borrow the money.
- The yearly property taxes that are charged to the home. Lenders will insist on collecting this; defaulting on your taxes could cause you to lose the house to local authorities, an event that they cannot intervene with.
- Monthly insurance payments that are paid on the home in the event of a fire, flooding, or roof damage. This is collected by the lender as well to ensure payments are made. You may also be required to pay a PMI which is an additional insurance for your lender if you are making a down payment of less than 20% of the home’s value.
What Is the Difference Between a Fixed and Adjustable Rate Mortgage?
With a fixed rate mortgage, the interest rate applied at the closing of the loan will remain consistent for the life of the loan, as opposed to the adjustable rate mortgage, which can fluctuate with the interest rate. The terms for an adjustable rate review are usually applied every 3, 5, or 7 years.
What Is APR?
APR, or annual interest rate, is a compilation of all the fees your monthly payments will be covering, including the interest. Closing costs, insurance fees, and taxes are all considered when determining APR.
What Is TBD?
TBD financing is securing a loan before choosing a house. To be determined programs allow you to start the house hunting program with the confidence of knowing how much credit will be extended to you.
Sean Z’s TBD mortgage program is helping thousands of St. Louis residents find the affordable house of their dreams as opposed to the unaffordable. It helps tremendously in making the process of buying a home as enjoyable and stress free as possible. Stop by our office today and get started on your right path to being a home owner.
Sean Z Mortgage – (314) 361-9979
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