For most Americans, paying for a home with cash is probably never going to be a viable option. So the vast majority of Americans must get a bank loan and secure a mortgage. If this is your first time buying a home, the following mortgage information could be helpful.
In general, your monthly mortgage payment, while it all goes to the same place, is split into two categories - interest and principal. The portion of your mortgage that is the principal is the part that actually is paying down your loan, while the rest is the interest you are paying the bank. So if you owe $100,000 on your house and your monthly payment is $1,000, some of that will be deducted from the $100,000 and the rest will simply go straight to the bank as a payment of interest.
There is more than one kind of mortgage loan and there are positives and negatives to each and every kind. A fixed-rate loan is one option, and this means that the rate of interest remains the same throughout the entire loan schedule. The two most common types of fixed loans are a 30-year-fixed and a 15-year-fixed. This simply means at the end of 30 or 15 years, you will have paid off the loan and will own the home free and clear. With a 15-year loan, your monthly payment will be higher because you are paying more off the principal each month. If you can afford this type of loan, you can pay off your home twice as fast, but often this monthly payment is too high for many people.
You also could opt for a loan that has a varying rate of interest. This means that the rates can fluctuate every year. One common type of variable loan is known as the 5/1 ARM. For five years your rate of interest will be the same and then it will change every year after that. This means your payment could go down or it could go up and you really have no control over this change. So why would anyone want an adjustable rate mortgage? For one thing, the rate of interest initially is lower than you would get with a 30-year-fixed and sometimes lower than a 15-year fixed. This means your monthly payment will be lower for at least five years. This can be a good option for people who intend to move within four or five years of buying the home or people who plan to refinance before the loan rate begins fluctuating.
When you buy a home, most people must come up with a down payment amount, but that is not the only expense that you will incur. While the person selling you their home will pay for the realtors' commissions, you will have to pay for home inspections and sometimes a home appraisal. There are also costs associated with getting a loan in the first place, such as a loan origination fee. You must pay to have a credit report run and you will have to pay for title insurance and other odds and ends. Sometimes you can see if a seller is willing to pay for some of these items or you can ask your lender if it can be rolled into your home loan as it might be easier to pay a little bit more each month than a big chunk when you buy the home.
While it all might seem overwhelming, if you have a great realtor the whole process can be much easier. Your real estate agent can explain much of the escrow process and help you understand the various costs and fees. For people wishing to buy Texas Hill Country real estate, Fredericksburg real estate or Kerrville real estate, consider contacting the team at Nixon Real Estate. They specialize in find homes for sale in Texas Hill Country and have more than 30 years of experience.
In general, your monthly mortgage payment, while it all goes to the same place, is split into two categories - interest and principal. The portion of your mortgage that is the principal is the part that actually is paying down your loan, while the rest is the interest you are paying the bank. So if you owe $100,000 on your house and your monthly payment is $1,000, some of that will be deducted from the $100,000 and the rest will simply go straight to the bank as a payment of interest.
There is more than one kind of mortgage loan and there are positives and negatives to each and every kind. A fixed-rate loan is one option, and this means that the rate of interest remains the same throughout the entire loan schedule. The two most common types of fixed loans are a 30-year-fixed and a 15-year-fixed. This simply means at the end of 30 or 15 years, you will have paid off the loan and will own the home free and clear. With a 15-year loan, your monthly payment will be higher because you are paying more off the principal each month. If you can afford this type of loan, you can pay off your home twice as fast, but often this monthly payment is too high for many people.
You also could opt for a loan that has a varying rate of interest. This means that the rates can fluctuate every year. One common type of variable loan is known as the 5/1 ARM. For five years your rate of interest will be the same and then it will change every year after that. This means your payment could go down or it could go up and you really have no control over this change. So why would anyone want an adjustable rate mortgage? For one thing, the rate of interest initially is lower than you would get with a 30-year-fixed and sometimes lower than a 15-year fixed. This means your monthly payment will be lower for at least five years. This can be a good option for people who intend to move within four or five years of buying the home or people who plan to refinance before the loan rate begins fluctuating.
When you buy a home, most people must come up with a down payment amount, but that is not the only expense that you will incur. While the person selling you their home will pay for the realtors' commissions, you will have to pay for home inspections and sometimes a home appraisal. There are also costs associated with getting a loan in the first place, such as a loan origination fee. You must pay to have a credit report run and you will have to pay for title insurance and other odds and ends. Sometimes you can see if a seller is willing to pay for some of these items or you can ask your lender if it can be rolled into your home loan as it might be easier to pay a little bit more each month than a big chunk when you buy the home.
While it all might seem overwhelming, if you have a great realtor the whole process can be much easier. Your real estate agent can explain much of the escrow process and help you understand the various costs and fees. For people wishing to buy Texas Hill Country real estate, Fredericksburg real estate or Kerrville real estate, consider contacting the team at Nixon Real Estate. They specialize in find homes for sale in Texas Hill Country and have more than 30 years of experience.
About the Author:
Pammy McGrath loves reading real estate blogs. If you are looking for licensed Fredericksburg TX real estate agents, or to find Fredericksburg Texas homes for sale, please check out the NixonRealEstate site today.