As a first-time home buyer, you feel excited about the whole idea of finally having your own house. Before you start looking for your “dream house” you need to get pre-approved for a mortgage. But is a mortgage anyway and how does it affect your choice of home? Here are some basic things about a mortgage that you need to know:
The mortgage is a loan that you use to buy a house or a land. The term of payment depends on your qualifications which include your credit history, job security, sources of income, among others. The mortgage is secured against the value of your home until the amount of loan is fully paid. If you cannot keep up with the payment, the lender can repossess your house and resell it so they can get their money back.
Where can you apply for a mortgage?
You can apply for a mortgage in many institutions including banks, builders, and private lending companies. If you are not confident about getting a mortgage yourself, you use a mortgage broker or a financial advisor to help you prepare the documents needed and be approved for a loan.
However, you can also apply for a mortgage without receiving any advice from any lending professional. This is called and execution-only mortgage which is very risky because if you make a mistake, you cannot make a complaint since you made the decision alone.
How will you know how much money you can borrow?
There are many real estate and mortgage website which offers free mortgage calculator. This service will be able to show you how many loans can you get approved for, what are the possible terms, how much you need to pay every month and what is the interest amount. Most lending companies have a mortgage calculator on their websites as well. Use this service to determine which bank has the best offer. You can also ask a bank representative or a mortgage broker to determine how much money you can borrow.
How does a mortgage work?
The mortgage will lend you money for you to buy a house. The entire amount of money you owe is called the capital. The capital earns interest that you also need to pay until the end of the term.
How will you repay mortgage?
Repaying your loan is the hardest responsibility that you need to think of every month. Generally, you need to pay the interest plus the part of the capital on or before the due date. Only when you paid all your loans that you can call your house really yours.