If you are currently in the market for purchasing your first home, you may have many questions in regards to how the process works as a whole. One of the most important pieces of information when buying your first home is being able to fully understand exactly what a mortgage is and what it means to receive a mortgage loan. That’s why, during this post, we will outline what a mortgage should mean to you when purchasing your first home, so that you do not make a hasty purchasing decision that could continue to haunt you for years to come.
If you are located in Birmingham or the surrounding areas, and are in need of a qualified mortgage broker to help assist you throughout the process of applying for and receiving a conventional loan, adjustable rate loan, or a variety of other residential home loans, do not hesitate to reach out to the professionals at Mortgage Xpress. With more than 17 years of expertise in helping both individuals and families finance the home of their dreams, we have the industry knowledge and skills to make obtaining your home loan simple. To learn why you should consider researching how mortgages work before obtaining a home loan, continue reading more below.
What Is A Mortgage?
Simply put, a mortgage is a loan that uses your house as insurance if you are unable to continue paying your loan. Mortgages can come in several different forms such as fixed mortgages, FHA loans, conventional loans, jumbo loans, and a variety of other home loans. Since each loan has different payment and interest guidelines, it is always best to work with a mortgage broker to find the best possible type of mortgage for your needs. Since mortgages are essentially loans, it only makes sense that you are receiving your mortgage from a lender.
The main lender for most mortgages are banks. While many banks allow individuals to apply for a loan, the terms and interest rates can greatly vary from one bank to another. This is why we strongly urge first-time homebuyers to work with one of our licensed and qualified mortgage professionals to help you find a mortgage that makes sense for your current situation.
Many do not fully understand how interest rates work, especially where adjustable rate mortgages are concerned. The implications of what can happen if you fail to continue making mortgage payments can be costly, which can result in losing your home. For this reason, many homeowners across the country each year have their homes foreclosed on, and in extreme cases face home repossession.
In fact, according to RealtyTrac, as many as 3 million people had their homes foreclosed on during the housing bubble in 2008 and the credit crisis that followed shortly thereafter. There is widespread debate that many unqualified buyers did not grasp how an adjustable rate mortgage’s interest rate can change over time depending on the state of the market, which many equate as one of the main causes of the United States housing bubble. This is just one example of why you should fully understand how interest rates can vary over time, depending on the type of mortgage you are looking to receive.
Payments and Additional Fees
When applying for a home loan, you will be required to pay an initial down payment. Down payments are large sums paid up front to reduce the total amount of money you will be required to borrow from a lender. It is important to keep in mind that a larger down payment will ultimately help lower the amount of your monthly payments. Traditionally, individuals used to make down payments equal to 20 percent of the home’s value. However, in modern times, it is much more realistic for first-time home buyers to make a down payment equaling anywhere from three to five, to even 10 percent of the home’s value.
While down payments are to be expected when receiving your first mortgage, there are many first-time home buyers that are shocked to find out that they are also required to pay closing cost fees. There are a variety of closing cost fees that can quickly add up to thousands of dollars. Hidden closing cost fees range from credit reports and insurance fees to appraisals and life of loan coverage. What many first-time home buyers don’t realize, however, is that many individuals selling their homes will negotiate to cover some, if not all of the closing fees associated with purchasing a home. For this reason, you should consider discussing closing fees with the real estate agent before talking about the home’s total cost.
The topics covered above barely scratch the surface of what mortgages are and how they work. This is why it is important to spend plenty of time researching what type of mortgage is best for you so that you can make an informed decision that you will feel comfortable with.
As Birmingham’s leading mortgage broker, Mortgage Xpress has helped countless families find a mortgage possessing the best principal, interest, tax, and insurance rates for their needs. We value those who choose to work with our qualified professionals, and are devoted to finding a lender that will put you in the best financial position possible. To learn more about our various loans offered, or to see how much home you can afford, visit our website. If you have any additional questions or concerns, call our friendly staff at Mortgage Xpress today!