Mortgage Basics For Beginners
In today’s blog post, we’re going back to basics and providing you with some general information about mortgage financing. If you’ve never bought a home before, this is the blog for you! Continue reading to learn more and if you’d like to talk with a mortgage professional, contact Patriot Home Mortgage in St. George or Mesquite today for a consultation.
What Is A Mortgage?
Buying a home will be one of the biggest financial decisions you’ll make. There are very few things that cost as much, which is why you’ll need to obtain a mortgage. Because it is such a big financial commitment, it’s important to have a feel for how the mortgage process works.
At its essence, a mortgage is a loan that you use to buy your home. There are many different kinds of mortgage financing, but they’re similar to other kinds of loans, in that you borrow a certain amount, pay interest, and have a certain number of years within which to pay off the loan.
What makes mortgages different is the size of the loan and the fact that you must use the loan to buy real estate.
How Do I Qualify For A Mortgage?
You must meet the minimum qualifications for whatever home loan you’re applying for. Different mortgages have different requirements. For example, a VA loan requires that you be a veteran or surviving spouse of a veteran. A jumbo home loan requires a certain credit score and down payment.
For any mortgage, you’ll need to meet a minimum credit score requirement. If you are worried about your credit score, an FHA home loan may be right for you, as the credit requirement is the lowest for this type of loan. Next, you’ll have to verify your income and debts; your lender will want you to verify your employment history, savings, and other financial information that will affect your ability to pay off the loan.
How Large Should My Down Payment Be?
New homeowners are often very concerned about the down payment since it requires saving upfront. But there are some loan programs that have different amounts of down payments, and some government-backed loans do not require any down payment.
Your down payment is the amount of the home purchase that you don’t have to borrow. When you make a large down payment, the amount you have to pay each month is smaller, since the overall size of your loan is smaller.
A conventional loan requires a 3% down payment and an FHA loan requires 3.5% down payment, though you can make as large of a down payment as you’d like/are able to.
How Does A Mortgage Work?
No matter what type of mortgage you get, your lender will give you a certain amount of money to buy the home and you will agree to pay back the loan over a certain number of years. During the time that you are paying off your mortgage, you don’t fully own your home. The amount you pay is also determined by the interest on your loan.
Your interest rate is determined by two things: the amount of risk that your lender determines that they are taking on by giving you the mortgage and the current market rates. While you can’t control the market rates, you do have some control over how the lender views your risk. If you have a higher credit score and a good credit report, the lender may be willing to give you a lower interest rate.
Your loan will also be determined by your income and what you can reasonably afford per month. It is also determined by the market value of the home, which is determined through an appraisal so that your lender is not giving you a loan for more money than your home is worth.
Want to learn more about mortgage financing? Contact Patriot Home Mortgage
We hope that this blog post helped answer some of the questions you may have about mortgage financing. We have other posts that go into more depth about the types of home loans, interest rates, loan terms, and more. If you’d like more information about mortgages, our mortgage company is happy to help. We serve clients across the western United States, including Nevada, Arizona, Utah, California, Colorado, and Texas. We’d be more than happy to talk with you about your mortgage financing options. We provide services for conventional mortgages, VA loans, USDA loans, jumbo loans, reverse mortgages, and more. Contact us today to get started.