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.
While you probably know that you will need a down payment for your home, there are plenty of other costs that you need to think about when creating a home buying budget. For instance, you will have to pay fees to the lender just to get a loan in the first place. You will have to pay hundreds of dollars for home inspections, title insurance, a home appraisal and a few other items. Usually the seller pays the commissions to the realtors which makes life easier for the buyer, but sometimes you also can negotiate a few of the other expenses into the deal to lower your upfront costs. You also might be able to include some of the costs in your mortgage loan, but not always.
Buying a home can be very stressful, especially if you have never done it before so it is wise to select a realtor with a great deal of experience. This is a trusted professional that can help explain many of the costs and details that most of us simply just don't understand. Of course, your realtor also can find a great home that suits your needs, tastes and budget. Contact the realtors at Nixon Real Estate if you are looking to settle anywhere within Texas Hill Country. If you wish to buy Fredericksburg real estate, San Antonio real estate, Kerrville real estate or a home anywhere in the region, they can help you with the entire process.
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.
While you probably know that you will need a down payment for your home, there are plenty of other costs that you need to think about when creating a home buying budget. For instance, you will have to pay fees to the lender just to get a loan in the first place. You will have to pay hundreds of dollars for home inspections, title insurance, a home appraisal and a few other items. Usually the seller pays the commissions to the realtors which makes life easier for the buyer, but sometimes you also can negotiate a few of the other expenses into the deal to lower your upfront costs. You also might be able to include some of the costs in your mortgage loan, but not always.
Buying a home can be very stressful, especially if you have never done it before so it is wise to select a realtor with a great deal of experience. This is a trusted professional that can help explain many of the costs and details that most of us simply just don't understand. Of course, your realtor also can find a great home that suits your needs, tastes and budget. Contact the realtors at Nixon Real Estate if you are looking to settle anywhere within Texas Hill Country. If you wish to buy Fredericksburg real estate, San Antonio real estate, Kerrville real estate or a home anywhere in the region, they can help you with the entire process.
About the Author:
Pammy McGrath loves reading real estate blogs. If you are looking for licensed Fredericksburg TX real estate agents, or to find Fredericksburg Texas homes for sale, please visit the NixonRealEstate.com site today.
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