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.
In general, your monthly mortgage payment, while it all goes to the same place, is split into two categories - interest and principal. The portion of your mortgage that is the principal is the part that actually is paying down your loan, while the rest is the interest you are paying the bank. So if you owe $100,000 on your house and your monthly payment is $1,000, some of that will be deducted from the $100,000 and the rest will simply go straight to the bank as a payment of interest.
There is more than one kind of mortgage loan and there are positives and negatives to each and every kind. A fixed-rate loan is one option, and this means that the rate of interest remains the same throughout the entire loan schedule. The two most common types of fixed loans are a 30-year-fixed and a 15-year-fixed. This simply means at the end of 30 or 15 years, you will have paid off the loan and will own the home free and clear. With a 15-year loan, your monthly payment will be higher because you are paying more off the principal each month. If you can afford this type of loan, you can pay off your home twice as fast, but often this monthly payment is too high for many people.
There also are variable rate loans. This means the rate of interest you pay can vary from year to year. The most common variable rate loan is called a 5/1 ARM. This means for the first five years of the mortgage, the rate is fixed. After that it adjusts every year. The advantage of a 5/1 ARM is that generally the initial rate is lower than the rate for a 30-year fixed loan, which means your monthly payment will be lower. If you sell the house or refinance the loan into a fixed-rate mortgage before the arm adjusts and potentially goes much higher, this can be a great deal. Otherwise, you risk having your mortgage cost go up and up and up every year, which certainly can happen and this can mean you spend hundreds of extra dollars each month.
When you buy a home, most people must come up with a down payment amount, but that is not the only expense that you will incur. While the person selling you their home will pay for the realtors' commissions, you will have to pay for home inspections and sometimes a home appraisal. There are also costs associated with getting a loan in the first place, such as a loan origination fee. You must pay to have a credit report run and you will have to pay for title insurance and other odds and ends. Sometimes you can see if a seller is willing to pay for some of these items or you can ask your lender if it can be rolled into your home loan as it might be easier to pay a little bit more each month than a big chunk when you buy the home.
All of this can seem daunting, but it's all much easier with the help of a trusted real estate agent. This professional can guide you through the maze of escrow and offer some helpful tips about mortgages. They also can help you negotiate closing costs and other fees. If you are ready to purchase Texas Hill Country real estate, such as homes for sale in Fredericksburg, Kerrville or San Antonio, the realtors at Nixon Real Estate can help you find a great home and help you deal with all the aspects of your first home purchase.
In general, your monthly mortgage payment, while it all goes to the same place, is split into two categories - interest and principal. The portion of your mortgage that is the principal is the part that actually is paying down your loan, while the rest is the interest you are paying the bank. So if you owe $100,000 on your house and your monthly payment is $1,000, some of that will be deducted from the $100,000 and the rest will simply go straight to the bank as a payment of interest.
There is more than one kind of mortgage loan and there are positives and negatives to each and every kind. A fixed-rate loan is one option, and this means that the rate of interest remains the same throughout the entire loan schedule. The two most common types of fixed loans are a 30-year-fixed and a 15-year-fixed. This simply means at the end of 30 or 15 years, you will have paid off the loan and will own the home free and clear. With a 15-year loan, your monthly payment will be higher because you are paying more off the principal each month. If you can afford this type of loan, you can pay off your home twice as fast, but often this monthly payment is too high for many people.
There also are variable rate loans. This means the rate of interest you pay can vary from year to year. The most common variable rate loan is called a 5/1 ARM. This means for the first five years of the mortgage, the rate is fixed. After that it adjusts every year. The advantage of a 5/1 ARM is that generally the initial rate is lower than the rate for a 30-year fixed loan, which means your monthly payment will be lower. If you sell the house or refinance the loan into a fixed-rate mortgage before the arm adjusts and potentially goes much higher, this can be a great deal. Otherwise, you risk having your mortgage cost go up and up and up every year, which certainly can happen and this can mean you spend hundreds of extra dollars each month.
When you buy a home, most people must come up with a down payment amount, but that is not the only expense that you will incur. While the person selling you their home will pay for the realtors' commissions, you will have to pay for home inspections and sometimes a home appraisal. There are also costs associated with getting a loan in the first place, such as a loan origination fee. You must pay to have a credit report run and you will have to pay for title insurance and other odds and ends. Sometimes you can see if a seller is willing to pay for some of these items or you can ask your lender if it can be rolled into your home loan as it might be easier to pay a little bit more each month than a big chunk when you buy the home.
All of this can seem daunting, but it's all much easier with the help of a trusted real estate agent. This professional can guide you through the maze of escrow and offer some helpful tips about mortgages. They also can help you negotiate closing costs and other fees. If you are ready to purchase Texas Hill Country real estate, such as homes for sale in Fredericksburg, Kerrville or San Antonio, the realtors at Nixon Real Estate can help you find a great home and help you deal with all the aspects of your first home purchase.
About the Author:
Pammy McGrath loves reading about real estate blogs. If you are searching for licensed Fredericksburg TX real estate agents, or to find Fredericksburg Texas homes for sale, please visit the NixonRealEstate.com site now.
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