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.
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 is more than one kind of mortgage loan and there are positives and negatives to each and every kind. A fixed-rate loan is one option, and this means that the rate of interest remains the same throughout the entire loan schedule. The two most common types of fixed loans are a 30-year-fixed and a 15-year-fixed. This simply means at the end of 30 or 15 years, you will have paid off the loan and will own the home free and clear. With a 15-year loan, your monthly payment will be higher because you are paying more off the principal each month. If you can afford this type of loan, you can pay off your home twice as fast, but often this monthly payment is too high for many people.
You also could opt for a loan that has a varying rate of interest. This means that the rates can fluctuate every year. One common type of variable loan is known as the 5/1 ARM. For five years your rate of interest will be the same and then it will change every year after that. This means your payment could go down or it could go up and you really have no control over this change. So why would anyone want an adjustable rate mortgage? For one thing, the rate of interest initially is lower than you would get with a 30-year-fixed and sometimes lower than a 15-year fixed. This means your monthly payment will be lower for at least five years. This can be a good option for people who intend to move within four or five years of buying the home or people who plan to refinance before the loan rate begins fluctuating.
Aside from having a chunk of cash for your down payment, there are many other fees and costs that you will incur when you purchase a home. The good news is that the person selling you the home will pay the commission to the realtors. However, you will need to pay for a home inspection and that can cost $350 or much more. Sometimes you also will have to pay for a home appraisal, which can cost about $400. You also will have to pay your lender closing costs related to obtaining a loan, such as a credit report fee, a recoding fee, title insurance and much more. Sometimes you can ask the seller to cover closing costs or a portion of these costs, and sometimes you can roll these costs into your mortgage loan.
Buying a home can be very stressful, especially if you have never done it before so it is wise to select a realtor with a great deal of experience. This is a trusted professional that can help explain many of the costs and details that most of us simply just don't understand. Of course, your realtor also can find a great home that suits your needs, tastes and budget. Contact the realtors at Nixon Real Estate if you are looking to settle anywhere within Texas Hill Country. If you wish to buy Fredericksburg real estate, San Antonio real estate, Kerrville real estate or a home anywhere in the region, they can help you with the entire process.
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 is more than one kind of mortgage loan and there are positives and negatives to each and every kind. A fixed-rate loan is one option, and this means that the rate of interest remains the same throughout the entire loan schedule. The two most common types of fixed loans are a 30-year-fixed and a 15-year-fixed. This simply means at the end of 30 or 15 years, you will have paid off the loan and will own the home free and clear. With a 15-year loan, your monthly payment will be higher because you are paying more off the principal each month. If you can afford this type of loan, you can pay off your home twice as fast, but often this monthly payment is too high for many people.
You also could opt for a loan that has a varying rate of interest. This means that the rates can fluctuate every year. One common type of variable loan is known as the 5/1 ARM. For five years your rate of interest will be the same and then it will change every year after that. This means your payment could go down or it could go up and you really have no control over this change. So why would anyone want an adjustable rate mortgage? For one thing, the rate of interest initially is lower than you would get with a 30-year-fixed and sometimes lower than a 15-year fixed. This means your monthly payment will be lower for at least five years. This can be a good option for people who intend to move within four or five years of buying the home or people who plan to refinance before the loan rate begins fluctuating.
Aside from having a chunk of cash for your down payment, there are many other fees and costs that you will incur when you purchase a home. The good news is that the person selling you the home will pay the commission to the realtors. However, you will need to pay for a home inspection and that can cost $350 or much more. Sometimes you also will have to pay for a home appraisal, which can cost about $400. You also will have to pay your lender closing costs related to obtaining a loan, such as a credit report fee, a recoding fee, title insurance and much more. Sometimes you can ask the seller to cover closing costs or a portion of these costs, and sometimes you can roll these costs into your mortgage loan.
Buying a home can be very stressful, especially if you have never done it before so it is wise to select a realtor with a great deal of experience. This is a trusted professional that can help explain many of the costs and details that most of us simply just don't understand. Of course, your realtor also can find a great home that suits your needs, tastes and budget. Contact the realtors at Nixon Real Estate if you are looking to settle anywhere within Texas Hill Country. If you wish to buy Fredericksburg real estate, San Antonio real estate, Kerrville real estate or a home anywhere in the region, they can help you with the entire process.
About the Author:
Pammy McGrath enjoys reading about real estate blogs. If you are searching for licensed Fredericksburg TX real estate agents, or to discover Fredericksburg Texas homes for sale, please visit the NixonRealEstate.com website today.
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