Buying a house is one of the biggest investments a person can make. However, the excitement and stress involved with such a purchase can often be overwhelming. Without the proper strategy and research, it’s very easy to make a mistake and end up spending more than intended. If you’re seeking a mortgage, you’ll need to be well-read on the subject and prepared to negotiate. Here is some of the most important information about mortgages.
What Is a Mortgage?
A mortgage is a specific type of home loan received from a bank or credit union. After choosing a house, a down payment can be made while having a lender loan for the rest of the money.. Once the house is paid for with help from the mortgage, home buyers can live in the house while paying the loan off in increments, often over a 30-year term. A mortgage can help individuals find housing, even if they do not have the full funds available up-front.
What Types of Mortgage Loans Are Available?
A mortgage loan isn’t as cut and dry as a by-the-books loan. There are various types of mortgages that can be acquired. As such, it’s good to know some of the most common types prior to applying.
These mortgages include:
Also referred to as conventional loans, FRM’s are the most commonly-acquired loans, as they set an identical amount each month for homebuyers to pay off. This makes them very consistent and inflexible to price fluctuations.
Interest-only mortgages work a bit differently than FRMs. As the first few years go by, homeowners have the choice to pay only the interest of the monthly payment. This is completely optional and can delay payment frequency and amount. In certain types of loans and situations, this can be quite helpful!
Adjustable-rate mortgages, also known as the 5/1 loan, experience a change in interest as time goes by. In other words, the interest of the loan depends on fluctuations in the economy as well as the cost of borrowing necessary funds.
VA loans are exclusive only to people who were veterans of the United States and who they’re married to. These loans make buying a home easier for these people as there is no need for a down payment and is guaranteed by the U.S government.
Depending on the homebuyer’s financial situation, obtaining a mortgage can be easy or completely overwhelming. Before moving forward, always make sure that the prequalifications are met.
John J. Bowman, Jr. is an accountant and tax professional based out of Pittsburgh, Pennsylvania. Follow him on Twitter for more blog updates!