A mortgage is a loan that allows people to purchase real estate. A mortgage typically involves paying back a certain amount of money over a defined period of time, usually in monthly installments.
The homebuying process can be complex and intimidating, especially if youre a first-time homeowner. But knowing the basics of a mortgage can help you get a better sense of what youre getting into and make sure you understand how your loan works before its too late.
How much can I afford?
The price of a home is far greater than the average households savings, so its important to start your search for a house with a clear idea of what you can afford. Then, youll be able to find the right home for your budget and meet with an agent who can help you navigate the process.
Buying a house is one of the largest transactions in your life, so its important to choose a mortgage that matches your needs and your budget. Its also a good idea to shop around for the best rates and mortgage terms to ensure you have the best possible financing option.
How to buy a home: 1. Get prequalified or preapproved for a mortgage.
A preapproval is a more thorough and formal way of determining your eligibility for a mortgage. It includes the lender verifying your income and credit information, as well as reviewing other factors that could affect your ability to qualify for a loan.
2. Explain the mortgage process to your family and friends, including what to expect and how much it might cost.
The process of getting a mortgage involves several steps and some additional paperwork, but it can be an exciting opportunity to begin building your financial future. The mortgage calculators below will help you determine the costs of a home and what it may take to pay off your loan in a timely manner.
Your interest rate: The amount you pay per month toward your mortgage, along with your principal payment. The interest rate is a percentage of the total balance youre borrowing, and it is paid every month until your loan is paid in full.
Principal: The original amount you borrowed when you opened your mortgage. The amount of the principal will go down as you make payments, but its important to remember that it may take years for you to pay off the entire amount.
Other fees: This can include property taxes, homeowners insurance, and a monthly escrow account to cover other costs that come up. These can add to the overall cost of your mortgage and can increase over time, so its a good idea to check them out before you decide to purchase a home.
A mortgage is a great way to avoid that giant one-time payment, but its important to do your research and know what youre getting into. Whether youre looking to get a new home or renovate the one you have, understanding how a mortgage works can make the experience a little less stressful and a lot more rewarding.