Understand the Process
Whether a first-timer or seasoned home buyer, your home buying and selling process can be as challenging as learning a new language. Before you make your move, it's important to first understand the steps involved and the buzzwords of the "deal" to ensure the smoothest transaction possible.
Below are some of the frequently asked questions that are posed by homebuyers who are new to the process of buying a home:
What is a mortgage?
A mortgage is a loan used to buy a home or other real estate property, with the home serving as the collateral for the loan, acting as the guarantee that the loan will be repaid.
What's in a payment?
Payments are comprised of principal, interest, property taxes, and possibly mortgage insurance. In the cases of condominiums, maintenance fees may apply as well. However, the real question is: how much can you repay over how many years? Consider how quickly you could repay your loan. Is it 15 years, 20 years, 25 years, or 30 years? Typically, the sooner you repay the loan, the more you'll save on interest payments. However, the longer you extend the term of your financing, the lower your monthly payments may be. When choosing a loan term, consider your budget, your long-term spending patterns, your income over the life of the loan, and how long you plan to stay in your home.
What is a fixed rate (mortgage)?
The interest rate is set for the full length of the loan and doesn't change. Therefore, since the monthly mortgage payment for principal and interest stays the same for the life of the loan, it's easier to plan a budget using this sort of loan.
What is an adjustable rate mortgage (or ARM)?
An adjustable rate mortgage (ARM) usually starts with a lower initial interest rate than traditional fixed rate loans. After a set initial payment period—anywhere from one to 10 years—the interest rate may change periodically based on market conditions. As the rate changes, so does your monthly payment.In addition, ARM loans feature an adjustment "cap" that limits how much the interest rate can go up, protecting you from large increases in your monthly payment. If you plan on being in your home for a shorter period of time, or expect your income to increase over the years, an ARM loan may be right for you.
What is the property appraisal?
A professional appraisal is done to determine the value of the home or other type of real estate. An appraisal is based on the home's condition and selling prices of comparable properties in the area.
What is the best mortgage for me?
The best mortgage is one that you can afford without cutting in on other necessities, and has interest rates and terms and conditions that give you peace of mind. Click Here to gain a better idea of which mortgage is the most affordable for you.
How much will my mortgage be?
The size of your mortgage and the monthly payments that you will incur are determined by the price of your home minus the down payment, spread over the term of the mortgage at the interest rate chosen.