Most of us probably will never be able pay cash for a house, so our option is to go to a lender or bank and get a mortgage. If you have never been through this process before, here are a few bits of information that might be of help.
Your mortgage payment is divided into two parts, even though you write the check to just one entity. A portion of the monthly cost actually reduces the amount you own on the loan, and the other part is paying off interest on the loan. How much you pay for each chunk depends on your loan type and your rate of interest. In the early years of loan repayment, you might see that a large portion of your payment is used only for interest, but as time progresses, more of this monthly cost will go toward paying off the premium.
When you are shopping around for a house loan, be aware that there are quite a few different types of mortgages, and you need to select the type that works best for your situation. A fixed mortgage is one very common option, and usually people opt for a 30-year fixed, although 15-year fixed-rate mortgages also are an option and sometimes 10- or 20-year mortgages, although those are rare. This simply means is that your rate of interest will never change and you will pay off the home in 30 or 15 years. Obviously 15-year loans seem like a great idea because you will own your home more quickly, but your payment will be substantially higher because you are paying more toward the principal each month. Many people just cannot handle this high monthly payment, so they opt for a more manageable 30-year loan.
Not all loans have rates that are fixed or stay the same, and sometimes you might want to consider opting for a loan with an interest rate that varies. The popular 5/1 ARM is the most common type of variable rate mortgage and with this loan, your mortgage rate will stay exactly the same for the first five years. Then it adjusts every year after that, which means you will either be paying more or less each month depending on whether the interest rate goes up or down. That sounds kind of scary, but if you plan on selling your house before the rate starts to move, you can actually get a good deal on these types of loans as the interest rate is lower than a 30-year fixed so your monthly payment will be lower. You also might be able to refinance the loan to a 30-year or 15-year-fixed loan and then you won't have to worry about rate fluctuations.
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.
Your mortgage payment is divided into two parts, even though you write the check to just one entity. A portion of the monthly cost actually reduces the amount you own on the loan, and the other part is paying off interest on the loan. How much you pay for each chunk depends on your loan type and your rate of interest. In the early years of loan repayment, you might see that a large portion of your payment is used only for interest, but as time progresses, more of this monthly cost will go toward paying off the premium.
When you are shopping around for a house loan, be aware that there are quite a few different types of mortgages, and you need to select the type that works best for your situation. A fixed mortgage is one very common option, and usually people opt for a 30-year fixed, although 15-year fixed-rate mortgages also are an option and sometimes 10- or 20-year mortgages, although those are rare. This simply means is that your rate of interest will never change and you will pay off the home in 30 or 15 years. Obviously 15-year loans seem like a great idea because you will own your home more quickly, but your payment will be substantially higher because you are paying more toward the principal each month. Many people just cannot handle this high monthly payment, so they opt for a more manageable 30-year loan.
Not all loans have rates that are fixed or stay the same, and sometimes you might want to consider opting for a loan with an interest rate that varies. The popular 5/1 ARM is the most common type of variable rate mortgage and with this loan, your mortgage rate will stay exactly the same for the first five years. Then it adjusts every year after that, which means you will either be paying more or less each month depending on whether the interest rate goes up or down. That sounds kind of scary, but if you plan on selling your house before the rate starts to move, you can actually get a good deal on these types of loans as the interest rate is lower than a 30-year fixed so your monthly payment will be lower. You also might be able to refinance the loan to a 30-year or 15-year-fixed loan and then you won't have to worry about rate fluctuations.
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 discover Fredericksburg Texas homes for sale, please visit the NixonRealEstate.com website now.
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