Buying a home can be stressful; especially for those first time home buyers! However, with basic knowledge of the things that matter most, it becomes a lot easier. For example, mortgage (a legal agreement by which a bank or other creditor lends money at interest in exchange for taking the title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.) may just sound like a fancy word for ‘house debt’. However, it is truly more than that. For more information about mortgage check out our last blog post!
Mortgage can be something that goes right over the head and displays itself as something that you’ll never be able to understand. However, with a good mortgage calculator, and someone by your side to help out; it shouldn’t be too hard to figure out.
Here are the most important things to know about mortgage, in other words, we’re listing all the most important things to know about the mortgage and why you need it.
There are a lot of people that may not completely understand how credit can be built. Buying a house and getting a mortgage is one way to really help build your credit score. Because a mortgage is a loan, it allows you to build your credit score since you have to be continuously on top of it for multiple years; a lot of plans are usually fifteen or thirty-year plans.
However, already having a credit score will make getting a loan a lot easier. Having a positive credit score already in place will help you get a better interest rate. When you have a negative credit score or none at all it isn’t likely that you will get the loan.
There are two things to note when it comes to mortgage insurance. At this point, you may very well be asking yourself, “why do I need insurance on top of mortgage?” And it’s a very valid question. It basically encourages a safe journey to paying off your debt.
What mortgage insurance is might just be your first question, and it’s easy to explain by its other name ‘mortgage guarantee’ and it’s Google definition: Mortgage Insurance is an insurance policy that compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer.
The next important thing with mortgage insurance is that it lowers the risk to the lender (the bank, insurance officer company, etc.) of making a loan to you (or the person who is taking out the loan). This way, you will qualify for a loan that you might not otherwise be able to get.
Annual Percentage Rate (APR)
Try remembering way back to those high school years (where they probably seem farther than they actually were) in math class when it seemed super vital to get everything in order. There was one math test that was dedicated to calculating the rates and whatnot. In other words, who knew there was actually something important to be learned in a math class?
The specifics of APR include discount points, lender fees, and mortgage insurance (if it is required). It will be slightly higher than the nominal interest rate for a loan in most cases. The APR can change literally everything when it comes to buying a home.
When applying for a home loan, it’s important to look at every aspect. While interest rates are important to consider, finding a reputable lender with high-quality service and in-depth knowledge is essential.