Understanding Your Mortgage

Understanding Your Mortgage

Whether you have done it once or are about to purchase your fifth, buying a home can be a long and difficult process. It can also be a process that is full of joy and hope, especially when you learn as much as you can about everything involved with finding your dream home.

One of the most intimidating parts of buying a home is financing it. While there are a lot of decisions to make when it comes to purchasing a house, how much to spend and how long to stretch that cost out is certainly one of the biggest ones.

Get to know as much as you can about what a mortgage is and what it will mean to you, and you can lower your stress levels and make this step a little easier.

Mortgages, Defined

A mortgage is a legal agreement between yourself and a lender. It allows you to purchase a home or refinance your home with the understanding that your lender has the right to take your property if you don’t repay the money. That’s a long definition for what it is at its most basic level—a loan. You are borrowing enough money, which is just credit, to purchase the home you want.

Home loans are not all made the same, though, and it can be easy to forget that basic definition quickly as you sort through all your options. There are long-term, short-term, fixed and adjustable loan options available depending on your current financial situation and your needs.

Long-term and short-term loans refer to the length of time in which you will pay them back. Long-term loans can stretch up to at least 30 years, while short-term loans may be due back in 15 years or less. Long-term loans have lower monthly payments and higher interest rates, while short-term loans have a higher monthly payback amount and lower interest rates.

Fixed and adjustable-rate loans deal with the amount of interest that will be included with your overall payback amount. Fixed-rate loans have a set interest amount while adjustable-rate loans have a flexible interest rate. While adjustable rates generally mean you are going to have a lower amount of interest due, they can be unpredictable and fluctuate with little notice.

What It Means for You

Understanding the definitions of what a mortgage is and all the assorted flavors they can come in is a great first step to easing the home-buying process. To better understand what it all means to you though; you need to dig into the process of how to obtain the loan.

Before you step into this kind of legal agreement, you need to check your current financial status. Obtaining your credit score is crucial. You need to know how much you are worth so that you do not take on more or less than you can financially manage. This is also a helpful step to take early in your home-buying process so that you can take action to improve your score before you start talking to lenders about a home loan.

When you are ready to start moving forward, get to know your lender. Spend time researching them, talk with them openly and honestly and ask any and every question that comes up. By the time you are ready to sign paperwork, you should feel completely confident in the agreement you are entering into.

When you work with a mortgage lender who loves what they do as much as we do, understanding what you are stepping into will be simple. We make it our goal to build a relationship with you and take the stress out of home-buying as much as possible.

Ready to understand every step of the home-buying process? Contact us to make things easy.

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