subject: What You Need To Understand About Home Financing [print this page] House hunting and house buying has many levels. For a first timer you have a lotto learn very quickly if you want to buy. You will spend more if you go in unprepared. So, looking at all the different aspects of buying your home will help you get a better deal. When you make smart positive decisions in all areas of the home buying process you could save yourself more money than you could imagine down the road. You will be making those agreed upon payments for a long time and every little bit helps.
There are a whole bunch of different ways to finance your house and each one has a ton of tiny details. You will need more than just a general idea for this. Your mortgage will stay with you for a very long time and it will probably be the biggest payment that you make each month all that time. You want to get the best interest rate that you can. That will take some looking around. The interest rate can change sometimes too and you need to be prepared for that.
You have to understand how much of your houses value can be financed before you will know what amount you will need. There is a loan to value ratio. It will affect your interest rate and if you will need mortgage insurance or not. If you have higher than 80% LTV you will likely be required to have that insurance. The higher the ration the lower your down payment. For example on a 100,00 dollar house with a 95% LTV loan you will need to come up with 5% of that 100 thousand for your down payment.
As for the types of loans, you want one that you are comfortable with. Sometimes you can get a really great interest rate on an adjustable loan but then you will need to be concerned if the rates go up because so will your payment. With a fixed rate mortgage you will never have to worry about rates rising, and if they go down you can always refinance and take advantage of the better rates. Most people will get either a 15 year mortgage or a 30 year. They will have different payments.
If you have ever heard of anyone using a balloon mortgage you are not alone. The risks involved are usually too much more most people to think about. The attraction is the very low interest and payments that you make in the payment plan part of the loan. The payments are interest only. After a predetermined number of years you will have to pay off the entire loan. This can be scary if you are not prepared to face that. You need a good reason to do this.
by: Jackie Smith
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