Buying a home for the first time can be an exciting and overwhelming experience. It’s easy to feel lost in the process when you have unanswered questions. This guide provides you with answers to a few of the most common questions.
What is a mortgage loan?
A mortgage loan is provided to one or more people by a lender to purchase a home. To get a home loan, you visit a lender, such as a bank and apply for the loan. They take your annual income, and any down payment required and add that information to the application for the loan before deciding on approval. There are many times when you apply for a specific amount of money, but the lender approves you for a different amount based on your finances or credit history.
What are the benefits of pre-approval?
Getting pre-approval for a home loan is the best option. The pre-approval shows how much money you can spend on a home. This information saves you time because you only look for houses within your price range.
What’s the difference between fixed rate and variable rate?
When applying for a loan, you need to decide what type of interest rate you want for the home loan. A fixed-rate mortgage loan is a loan that has an interest rate that never changes. It allows you to know what your payment is from month-to-month. Another loan option available to you is a variable-rate mortgage. A variable-rate mortgage has a low-interest rate at first, but the rate can increase as time goes on. Fixed-rate loans tend to have higher interest rates than variable-rate loans, but you will pay the same rate throughout the entire course of the loan.
Are there different kinds of loans?
You also need to consider what type of loan you want. There are many different types of home loans available, and all have their individual pros and cons. A conventional home loan is a loan that is not insured by the government. That means that it is only backed by the lender and does not always require you to have mortgage insurance.
An FHA loan is a loan that is backed by the Federal Housing Administration. It protects lenders from possibly losing money if the person borrowing it does not pay their home loan. These types of loans are a great option because they allow you to have a lower down payment. An FHA loan does require that you pay for mortgage insurance. This protection ensures that the house stays repaired during the life of the loan.
VA loans are loans offered to military members, veterans, and their families. These loans allow individuals to purchase the home of their dreams without having a down payment.
If you are interested in owning a home but have a modest income, a USDA or RHA loan may be right for you. A USDA loan is a loan insured by the United States Department of Agriculture, and the RHA loans are guaranteed by the Rural Housing Authority. They are designed to help individuals with modest incomes to become homeowners. Income restrictions apply to ensure that only those in need can get these loans.
When you request a loan, you have options when it comes to how long you must pay it back, as well. You can choose a loan that you should repay for the next 10, 15, 20, 30, 40 or even 50 years. The longer you take to pay the loan, the lower your monthly payments will be. It is important to realize that taking longer to pay off the loan will also increase the amount of money that you must pay in interest payments. Many people choose to pay off their loan as soon as they can so that they pay as little in interest as they possibly can.
Your real estate agent is the best source of information about the local community and real estate topics. Give Jon Bastian a call at 772.291.8851 or Nancy Bastian at 954.816.2061 to learn more about local areas, discuss selling a house, or tour available homes for sale.