Buying a home for the first time can be scary. We are here to help you understand the moving parts of the home buying process. This is an overview of the definition of a mortgage and how to get one.
If you’re a first-time homebuyer or simply a newbie to the whole mortgage process, you may be feeling a bit overwhelmed. That’s completely understandable. When taking out a mortgage, there’s a ton of terms, steps, and moving parts.
What’s a Mortgage?
A mortgage is just a fancy name for a home loan or loan taken out to help finance a real estate purchase.
Chances are, you don’t happen to have enough cash on hand to purchase a property. But, that doesn’t mean that homeownership is unobtainable. That’s what mortgages are for. When you’re ready to buy a home, this loan will help you cover the cost.
When you take out a mortgage, you are agreeing to use the property you are purchasing as collateral, or in other words, as a sort of security deposit to ensure you pay back the loan.
You can even take out a second mortgage on a piece of real estate that you already own, putting that property up as collateral. Often second mortgages are used to help finance another project such as a home makeover, or even for some other purpose such as paying off credit card debt.
Basic Mortgage Terminology Explained
- Mortgage borrower- the individual borrowing the sum of money or taking out the loan.
- Lender or creditor- the supplier of the loan, usually a bank or other financial institution like an investor or credit union.
- Principal- the original sum of money borrowed from the lender.
- Interest- when paying back a loan, interest is the amount on top of the principal paid to the lender. Interest is the amount that the lender charges to supply the loan.
- Total Monthly Payment- the $ amount you will pay every month, usually including principal and interest, as well as extra fees including homeowner’s insurance and taxes.
How Do I Get a Mortgage?
For real estate newbies- getting a mortgage may seem like quite an impossible feat. And with good reason- it’s a complex process, more often than not coming along with stacks of paperwork and a number of confusing time-consuming steps.
Before applying for a mortgage you’ll want to make sure your credit is in check and that you’ve got enough saved away for a down payment, deposit, and closing costs. It’s also a good idea to get pre-qualified and later pre-approved for a loan. The next step in the process- find the right lender and then, you’re finally ready to go ahead and submit your application. If this all sounds incredibly complicated- that’s because unfortunately, it is.
But good news- that’s what us real estate agents are here for! An experienced real estate agent can help you through the entire home-buying process- from researching potential neighborhoods and shopping for your dream home to set up home inspections and, surprise, surprise- getting a mortgage. We are here to set you up for smooth sailing.
If you’d like to dive deeper into the complex world of mortgages, such as down payments, the types of mortgages available, intermediaries and interest rates, contact me and I’ll get you in touch with the right lender.