For first-time home buyers, mortgages can seem pretty daunting. Typically, a mortgage is a loan for the amount of money you pay for your home.
The majority of home buyers will need some sort of mortgage to purchase their home. This guide will walk you through the different types of mortgages as well as their fees and payment options.
Different Kinds of Mortgages
Before deciding on a loan, talk to at least two different lenders to make sure you’re getting the best possible deal.
Breakdown of the 4 Different Types of Mortgages
The standard loan for homebuyers with good to excellent credit is a conventional mortgage. Generally, a conventional mortgage includes a %10 down payment, but there are additional options depending on credit and location.
For homebuyers with lower credit scores, a Federal Housing Administration (FHA) Mortgage offers down payments as low as 3.5% and lower interest payments. However, a FHA loan may require mortgage insurance premiums which can result in higher costs.
VA Mortgages are available for all veterans and active military members and can have much lower interest rates than other loans.
Homebuyers in rural areas, of modest means and with lower credit scores, may be eligible for USDA Mortgages depending on their location. These loans offer lower interest rates and 100% financing.
What Payments are Associated with my Mortgage?
Whenever you borrow money from a lender, you have to pay back interest. It accrues over time and is added to your monthly mortgage payment.
The annual taxes you pay for your property are assessed and divided by the number of mortgage payments before being added to your mortgage. Lastly, your mortgage includes monthly homeowners insurance, which protects your property against damages.
Setting Your Budget and Shopping Around
You know what a mortgage is, and what kind of loans are available, so now it’s time to set your budget. Determine how much you can afford to pay each month, on top of your down payment and likely interest rates, and research the market.
Before you begin to tour your dream homes, research the selling prices – not just the listing prices – of homes in your area. This will give you a better idea about the area’s affordability.
For properties near Lake Norman in NC, check out my free buyer’s guide. It will connect you to resources and tools that make shopping for homes easier.
Any Lingering Questions? I Can Help.
If you have any questions about mortgages or want to explore homes for sale around the Lake Norman and Charlotte area, let’s talk. Contact me at (704) 902-6755.