Understanding a Mortgage
Purchasing a home is a huge decision with implications for many different aspects of your life – not the least of which is your finances. Many first-time home buyers are confused by the process of taking out a mortgage. Even the term can sound daunting, and carries heavy or fearful connotations for some people. You should know, however, that with just a little planning purchasing a home can be a great investment and a wise financial decision.
The first step to managing your mortgage occurs even before you have begun to house hunt. You should begin making sure that your current finances are in order before buying a home. You will want to check your credit report and begin tying up any loose ends such as getting any mistakes on the report fixed with your creditors and closing out unused credit cards. You’ll want to be saving money for a down payment on your new home during this time, but paying off debt with high interest rates attached is the first priority.
Once you’re ready to look for a mortgage, make sure to do your homework. Don’t just accept the first offer that comes around: Shop your options and let several lenders compete for you. Remember, you don’t need to provide every creditor who asks the permission to examine your credit report. First look at their “good faith estimate” and try to negotiate down some of the more creative fees such as “underwriting fees,” “processing fees,” and “loan origination.” If you have a deposit saved up, even if your lender doesn’t require it, it will help lower your monthly payments and secure you a better rate. You also won’t need to pay a mortgage indemnity guarantee.
Mortgage Payments 101
Your monthly mortgage payments may be confusing. Your loan is “amortized” – which means that you will pay it off over a long period of time, usually in a series of monthly installments. These monthly payments will cover both the principal and the interest of your loan. The principle is whatever balance you still owe on your loan. Your mortgage has a set amount of time in which you will pay it off. If you have a fixed-rate mortgage, the payments will stay the same throughout the life of the loan. If you have an adjustable-rate mortgage, the interest rate you pay on the loan will fluctuate over time, changing the monthly payment that you make toward your mortgage.
Both “mortgage” and “amortize” come from the Latin word for “death” because an amortized loan is slowly “killed off” over a long period of time. Little by little, you’ll pay back your home loan plus interest. If you were to fall behind on your payments, you put your home in risk of foreclosure, because your home is the collateral for your loan. This means that the bank essentially holds your home in security of your payment, so if you cannot procure the money, they can seize your home. That’s why it is important to plan strategically and carefully for what you can afford and how you will pay off your mortgage.
Aggressive Westlake Village Realtor®
Do you have more questions about mortgages? Westlake Village Real Estate Agent Lydia Gable is one of the top Realtors® in Los Angeles and Ventura Counties. With marketing and management experience at the executive level for corporations like Mattel and Target, Lydia is able to bring her knowledge from the business world into play for her real estate clients. Specializing in fine homes and luxury estates, our team at Lydia Gable Realty Group can help you find the place for your budget and lifestyle in Agoura Hills, Oak Park, Newbury Park, Calabasas, Conejo Valley, Thousand Oaks, or Westlake Village. Call our team today!