You’ve made the decision to buy your first home; congrats! This is a worthwhile undertaking that will pay off in the long run.
Now is the time to start thinking about a mortgage. Homes are expensive, so in order to actually own one you’ll probably need to take out a mortgage loan with your local bank.
Don’t fret! Mortgages don’t have to be scary. I’ll break down the different kinds of mortgages you can have as a homeowner, but feel free to contact me if you have any questions!
There Are Many Kinds of Mortgages
Depending on your financial situation, there may be more than one type of mortgage available to you. Generally, a mortgage is simply a loan for the amount of money your home is worth.
Each type of loan comes with different fees and interest rates, so it’s important to talk to at least two lenders before deciding on one. This way, you can ensure you’re getting the best deal possible.
The conventional mortgage is for homebuyers with good to excellent credit. These generally include a 10% down payment, with other options available depending on location and additional financial information.
Federal Housing Administration (FHA) Mortgage
The FHA mortgage is available for buyers with lower credit scores. It offers down payments as low as 3.5%, with lower interest rates on average.
The only catch is that these types of mortgages may require mortgage insurance premiums, which can result in higher costs.
VA & USDA Mortgages
VA mortgages are available for all veterans and active military members. Generally, these have drastically lower interest rates than other kinds of loans.
USDA mortgages are for homebuyers with modest incomes and low credit scores who live in rural areas.
How Much is a Mortgage, Anyway?
Four payments are associated with most mortgages. Your principle is the repayment of your mortgage, or the value of your home. Interest accrues over time. Whenever you take out any kind of loan, you are required to pay the lender interest.
You pay taxes for your home annually, which are usually divided by the number of mortgage payments you have before being added to it.
Mortgages also include monthly homeowners insurance, which protects your home against damages and natural disasters.
Time to Shop!
Now that you’re a little more informed about the kinds of mortgages available to you, it’s time to shop around!
The first step to buying a home is setting your budget. Thoroughly research the area you want to buy in. Be sure and look up the selling prices, not just the listing prices, for home in your area to get a better feel of what you may pay for your dream home.
Determine how much you can spend in a month. As a general rule of thumb, your total mortgage payment (including principle, interest, taxes, and insurance) should be no more than 28% of your income before taxes.
Need Help Navigating the Homebuying Process?
I can help with that. As your Plymouth, Canton, Northville, and Novi area expert, I have a wealth of information about the homes for sale here. I can also help you in prequalifying for a mortgage.
Please reach out to me if you’d like to chat about your real estate goals!