Owning a home is a big milestone in anyone’s life. To get that home, you are going to need a mortgage. If you are unfamiliar with how mortgages work, you have come to the right place. The Hilton Head moving company, All My Sons Moving & Storage, is here to discuss the basic terms and concepts of mortgages.
A mortgage is a loan you get to pay for a home. The home is collateral for the loan, meaning that if you do not make your mortgage payments, the lender can take away your home from you, which is called a foreclosure.
The principal is the amount that you actually borrow to purchase the home.
Interest is the amount that the bank charges you to borrow their money. Interest rates are percentages that are based on current economic indicators.
The term is the amount of time that you finance your loan, usually between fifteen and thirty years.
Fixed-rate mortgages enable buyers to spread out the cost of the home by making smaller payments over a long period of time. They are also easy to understand. Homebuyers are protected from sudden and potentially significant increases in monthly mortgage payments if the interest rates rise.
Adjustable-rate mortgages are loans that the interest rate is subject to change. When the interest rates change, the monthly payment is adjusted to reflect the new rate.
Your monthly payments are made from your net income, and your debt-to-income ratio should not exceed 36% of your gross income. To calculate your monthly debt based on this ratio from the Hilton Head moving company, multiply your gross income by 0.36, then divide that number by 12.
It is important you shop more than one lender when looking for a mortgage to make sure you are getting the best rates possible. The lender is the company that supplies you with the loan. They can be banks or mortgage brokers. The Hilton Head moving company agrees that you need to be completely familiarized with the concept of mortgages and about the entire lending process. A reputable mortgage specialist will discuss the process with you with a transparent manner.
You must have a good credit score to get a mortgage, as well. Credit scores show lenders that you are a reliable borrower, and pay back your debt on time. A mortgage is considered debt, but a good one. Mortgages do not hurt your credit.
Being pre-approved for a loan shows your buyer that you are ready and able to make a purchase.
When in the market for buying a new home, take your time and think about the decisions you are making throughout the process. There is so much more to mortgages, and your Hilton Head moving company is here to help. Although purchasing a new home may be stressful, learning more about mortgages and becoming familiarized with the concept can help ease a bit of the stress.