First, let’s talk about mortgages. Most buyers need one, and there are a lot of options that vary greatly between lenders and buyers. This means it’s important to understand what you’re looking for and talk to a lot of different lenders to ensure you’re getting the best deal possible.
There are four basic types of mortgages used by the majority of home buyers.
There are four main components to a mortgage payment, often abbreviated as “PITI.”
Principal |
Interest |
Taxes |
Insurance |
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Before you decide on any particular loan or lender, it’s important to do your research. That means meeting different lenders to ensure that you’re getting the best rate possible. It’s also important to understand two different types of interest rates offered by mortgage lenders.
The interest on an FRM will not change, so your monthly payments won’t change, making them very predictable.
The interest rate on an ARM will often be lower initially, but as interest rates do fluctuate with the market, they can be somewhat unpredictable or even result in higher payments.
Now that you know what loan options are available to you, what you can expect to pay as a down payment, and what your likely interest rates will be, it’s time to determine how much you can afford to pay every month, which will then be used to calculate the price range of your home.
Keep in mind that your mortgage costs will be based both on the price of the home and the CURRENT interest rates. A home’s affordability can vary from one day to the next based on the current rates.
Think of this as your security deposit. It’s paid when you submit your offer to show the seller that you are serious. When your offer is accepted, it is applied to your down payment or closing costs.
This is determined by your loan, or possibly any government programs or assistance you have requested.
These are typically low for buyers and represent the fees associated with paperwork and lender charges.
If the seller accepts your offer, it’s time for a home inspection. Before you close, you’ll want to have an experienced professional walk the house to ensure that there aren’t any lingering problems or maintenance issues that might not be visible at first glance. You don’t want to be hit with a serious maintenance or structural issue right after you move in. If necessary, you can request that the seller repair any issues you find.