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.
Every month you will have to make a mortgage payment, and this payment goes to your lender but it is split into two types of payments. One portion of the payment actually reduces the amount of money you owe on your house. The other portion is a payment of interest to the lender. For example, if your mortgage payment is $1,500 per month, some cash will go to actually paying off the mortgage and the rest will be an interest payment. It all depends on the type of mortgage loan you have and your interest rate.
There are many different types of mortgage structures and each has its advantages and disadvantages. One type is a fixed-rate mortgage. This means your rate of interest is fixed the entire time you have the loan. Generally, you can get a 30-year fixed mortgage or a 15-year fixed rate mortgage, which means your house loan will be paid off in either 30 or 15 years. The rate of interest for these two loans might be similar, but you will pay a larger chunk of the principal each month with a 15-year loan. This is a great idea if you can afford it, but often this payment is too high for many families to manage so they opt for a 30-year fixed 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.
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.
While it all might seem overwhelming, if you have a great realtor the whole process can be much easier. Your real estate agent can explain much of the escrow process and help you understand the various costs and fees. For people wishing to buy Texas Hill Country real estate, Fredericksburg real estate or Kerrville real estate, consider contacting the team at Nixon Real Estate. They specialize in find homes for sale in Texas Hill Country and have more than 30 years of experience.
Every month you will have to make a mortgage payment, and this payment goes to your lender but it is split into two types of payments. One portion of the payment actually reduces the amount of money you owe on your house. The other portion is a payment of interest to the lender. For example, if your mortgage payment is $1,500 per month, some cash will go to actually paying off the mortgage and the rest will be an interest payment. It all depends on the type of mortgage loan you have and your interest rate.
There are many different types of mortgage structures and each has its advantages and disadvantages. One type is a fixed-rate mortgage. This means your rate of interest is fixed the entire time you have the loan. Generally, you can get a 30-year fixed mortgage or a 15-year fixed rate mortgage, which means your house loan will be paid off in either 30 or 15 years. The rate of interest for these two loans might be similar, but you will pay a larger chunk of the principal each month with a 15-year loan. This is a great idea if you can afford it, but often this payment is too high for many families to manage so they opt for a 30-year fixed 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.
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.
While it all might seem overwhelming, if you have a great realtor the whole process can be much easier. Your real estate agent can explain much of the escrow process and help you understand the various costs and fees. For people wishing to buy Texas Hill Country real estate, Fredericksburg real estate or Kerrville real estate, consider contacting the team at Nixon Real Estate. They specialize in find homes for sale in Texas Hill Country and have more than 30 years of experience.
About the Author:
Pammy McGrath enjoys 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 today.