Rarely are people able to actually pay cash for their home. It's a wonderful idea, but most of us have to get a loan and make monthly mortgage payments. If you are ready to dive into the real estate market for the first time, here are some helpful facts concerning mortgages that might be of interest to you.
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 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.
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 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.
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 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 website now.
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