Obtaining a mortgage loan can become confusing for some people.Lots of paperwork to sign, documents to look over and steps to take are all a part of the mortgage process. You’d think you were applying to go to Harvard or Yale, except they don’t require that much paperwork for you to be admitted! Although getting a mortgage can be a confusing process, there are three terms that every mortgage holder should know to better understand what he is she is getting into.
Knowing what you are getting into by understand some of the simple mortgage facts will help you immensely.
The first term you should understand is, amazingly, the word “term”.Term refers to how long the mortgage payments will be-or the length of the mortgage borrowed.
Many mortgages run the gauntlet of between ten and thirty years. The longer the mortgage, typically the lower your monthly payment will be (and the more interest the mortgage company makes). Generally speaking, you should go for the shortest term you can comfortably afford – you’ll save potentially tens of thousands (and in some cases potentially over a hundred thousand) dollars in interest by keeping the length of the mortgage as short as you can.
Next, understanding your mortgage and how is caculated will be important. The interest rate refers to the amount of interest charges you will pay for the money you are borrowing, expressed as a decimal – such as 5.2 for 5.2%. Is it fixed or adjustable? In other words, is it the same through the life of the loan or does it change at specified periods in time?You should try and stay clear of ARMs even though they can look attractive initially.These type of mortgage will adjust to a higher rate resulting in a bigger payment that many people are not ready for!
Finally, comprehending closing costs and how they can increase your purchase price. Often times, you are going to be responsible for coming up with these closing costs out of your own pocket. Closing costs consist of things such as appraisals done on the house, attorney fees, notary fee, deed fee – if there is a fee they can think of it usually falls under the term closing costs! Be a smart and savvy consumer, if you see a fee that you don’t understand or doesn’t seem right – speak up! Some mortgage lenders try to sneak in any fee they can think of to make a few extra dollars profit.
Understanding these three terms can help make you a more informed home buyer and help you find the mortgage that is right for you .Similar to any other purchase, you should shop around for a loan program that fits your need when you are in the process of buying a home.Even with a little difference in interest rate between two lenders can amount to thousands in saving over the course of the mortgage.Be sure to shop around,- it is your money you are spending!
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