What Exactly Is A Mortgage?
While every homeowner knows what a mortgage is
, there are those who have only heard the term in movies, television, and commercials, but don't really understand what a mortgage is really all about.
So, we'll start from the very beginning.
Simply put, a mortgage is a loan in which you use your home as collateral or security for the loan. While a normal loan, like a credit card loan for example, does not require security. A mortgage does and that would be your home. This security or collateral is required in the event that something should happen where you are unable to continue your monthly payments. The collateral gives the loan company recourse to get their loan back. Therefore you need collateral/security in order to get a mortgage.
Buying or selling a home is no easy task. There are many factors that need to be taken into consideration; the main one being the amount of money you can afford. That effects every aspect of buying a home.
For example you will need money for: the down payment; earnest money or good faith deposit; closing costs; and of course your monthly mortgage payment.
There are a number of types of mortgages for you to choose from in regards to your financing. For example the fixed rate mortgage and the adjustable rate mortgage. The basic difference between the two is how the payments are set up and whether or not each payment will be influenced by current interest rates across the country.
If you are looking for investment property there are commercial loans.
But before you decide to buy a home, it would be a good idea to do some research and familiarize yourself with the various types of mortgages and their payment schedules.
A general rule of thumb in your decision of what you can afford is the 28/36 percent rule. Maximum amount of your gross income to be applied to your mortgage is 28 percent. Maximum amount applied toward mortgage expenses and your regular debt expenses (i.e. car loans, credit cards, etc.) is 36 percent.
Buying a home is the biggest investment most people will ever make. It's the American dream. So make sure you are well educated on home ownership before you even contact a real estate agent.
Signs of Good Mortgage Brokers
A good mortgage broker is someone every potential homeowner or experienced real estate investor needs to have on their side.
There is no shortage of brokers and real estate agents out there and they come in all shapes and sizes with various personalities.
What people don't realize is that if you have a very helpful and friendly broker, it can really make a difference in your entire attitude about getting a loan.
When you have a good mortgage broker, you will have a stress free transactions process, because they will explain the steps to you simply and easily.
As you can see there is a lot more to the real estate transaction than meets the eye. A professional real estate agent will walk you through all these points, and more, explaining each step along the way.
by: Ryan Round
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