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.
Every month you will have to make a mortgage payment, and this payment goes to your lender but it is split into two types of payments. One portion of the payment actually reduces the amount of money you owe on your house. The other portion is a payment of interest to the lender. For example, if your mortgage payment is $1,500 per month, some cash will go to actually paying off the mortgage and the rest will be an interest payment. It all depends on the type of mortgage loan you have and your interest rate.
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.
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.
Every month you will have to make a mortgage payment, and this payment goes to your lender but it is split into two types of payments. One portion of the payment actually reduces the amount of money you owe on your house. The other portion is a payment of interest to the lender. For example, if your mortgage payment is $1,500 per month, some cash will go to actually paying off the mortgage and the rest will be an interest payment. It all depends on the type of mortgage loan you have and your interest rate.
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.
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 find Fredericksburg Texas homes for sale, please visit the NixonRealEstate.com site today.
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