Navigating the mortgage process can be difficult for even the most knowledgeable of people. Real estate and mortgage language can be confusing and full of jargon, but we want to help demystify the process and dive deep into the world of mortgages.
What is a mortgage?
Most homes in today’s market cost tens to hundreds of thousands of dollars, and few people can afford to buy them outright. That’s where a mortgage comes in. At the most basic level, a mortgage is a loan that allows you to buy a house.
It’s different than other types of loans in that it’s specifically designed for purchasing a house. After a down payment, you’ll get a loan for the remaining cost of your house that you will pay back plus interest.
What is a down payment?
A down payment is a percentage of the total cost of the house that you pay upfront. The more you pay in a down payment, the less you will have to borrow from a lender. Typically lenders recommend that you pay 20% of the total cost of the house as a down payment, but if you aren’t able to afford that much there are still options for you.
There are specific government programs available to help you afford a house with a low or even no down payment. If you are or were in the military, you may be able to get a loan from Veterans Affairs or the Navy Federal Credit Union.
For those living in rural areas, you might want to check out the U.S. Department of Agriculture (USDA) Rural Development Housing which helps individuals in remote areas finance a home. If you don’t qualify for any of those loans, you may be able to secure a low down payment loan with the Federal Housing Administration.
What is fixed- vs adjustable-rate mortgage?
Getting a fixed-rate mortgage means that the amount of interest you pay will not change over the life of the loan. You will pay the same amount each month. This is helpful for people who don’t want any surprises and are okay with paying the same rate each month even if the market rates change.
An adjustable-rate mortgage means that the amount of interest you pay changes based on current market rates. This type of loan is usually cheaper than a fixed-rate mortgage, but it comes with some risk because your monthly payment amount may change over time.
What is a mortgage broker?
A mortgage broker is a professional who helps you navigate the mortgage process. They will help guide you through the steps to find and negotiate your mortgage. Brokers are paid either by the lender or the borrower. Even if you pay a mortgage broker a percentage of the price of your mortgage, you could end up saving money in the end.
Why does my credit score matter?
Your credit score is a number that “scores” how reliable you are with paying your credit. Your score goes up when you pay on time, and it goes down when you are late or delinquent. Mortgage lenders look at your credit score to determine what kind of rate to give you on your mortgage.
The better score you have, the lower your rate will typically be. If your credit score is currently not as great as you would like it, you may want to spend some time working to improve it before you apply for a mortgage.
The best way to improve it is to pay off your credit on time.
Why does a good REALTOR™ matter?
One of the most important parts of the home-buying process is finding a reliable REALTOR™ to guide you through the steps. At Steinborn, we use our years of experience together with our dedicated team of professionals to help you find your dream home. Our online listings are the most extensive in the area, and new properties are added to it every day.
If you’re interested in finding out more about how Steinborn & Associates can help you find your dream home, contact us today.