Planning about buying a home within this year? You have to figure out how much you can afford which will depend on your expenses, credit rating, income, down payment, and loan interest rate. If you have no liquid funds and enough savings to buy the property outright, the best option is to avail a mortgage loan. However, there are lots of things that you should know to before applying for a mortgage.
What is a mortgage loan?
Mortgage is used by borrowers to purchase a real property. Through getting a mortgage, the purchaser was able to generate money to buy the property. In the event that you fail to perform your financial obligation, the lender will take over on the secured property.
The features of mortgage include loan size, loan maturity, interest rate, loan payment, and other matters. It is normal that your home purchasing decision will be funded by a lending institution through a mortgage. In countries where home ownership is high, the strong demands for mortgage companies have developed.
Before applying a mortgage you have to understand the following important terms:
Points are fees you paid to the lending institution or broker for the home loan which are often associated to the interest rate. Usually, the lower the rate, the higher the points you pay. As a beginner, you can check or ask from a broker about the latest offered rates and points.
Interest Rate is the amount of borrowed money expressed in percentage rate. Each broker and lender has list of quoted interest rates. You have to ask your broker if the rate is adjustable or fixed. Expect that once your adjustable-rate goes up, your monthly payment also increases.
Lock-in is a non-verbal agreement between the borrower and the lender. In the written agreement, the specific rate on a mortgage loan is stated provided that it is closed within the agreed period of time.
Fixed-rate mortgage (FRM)
Fixed-rate is best if you plan to stay in your house for long period of time because the loan duration and payment amounts are fixed. Usually, it is more expensive than ARM.
Adjustable-rate mortgage (ARM)
Adjustable-rate mortgage (ARM) is also known as variable-rate loan which allows the borrower to pay much lower initial payment. The interest rate being paid varies over time.
Knowing the above mortgage terms will help you to fully understand the next thing that you should do which is finding a reputable mortgage broker. Brokers will make things easy for you. They will serve as your adviser and do all preparation and paper work. Brokers have the expertise in making arrangement and transactions to give you more options. They will help you obtain the best deal. You can contact more than one broker to make sure that you are getting the best price.
Getting the best financial deal will help you to save money. A mortgage loan whether it is a refinancing or home purchase is just like other product in which the price may be negotiable.