Navigate Your Home Loan Like a Pro!
Financing a home is one of the primary concerns for most home buyers in Tehachapi. Your agent at Associated Real Estate is here to help you navigate the maze of loan types and mortgage terms. Here are some of the basic loan terms to help you get started. And remember, with any home purchase your first step should be to contact a reputable realtor and schedule a FREE consultation. If you are planning to purchase a home call us now at 661-822-3500.
- Mortgage – A loan specific to purchasing property, where the bank liens you the title with the agreement you will pay the entirety of the balance owed on your beautiful Tehachapi property!
- Conventional Mortgage – Any mortgage loan that is not insured or guaranteed by the federal government. This applies to all privately owned property, and is the most common type of mortgage.
- Term – Refers to the length of the loan. Home loans (mortgages) are often in terms of 15, 20, or 30 years. Generally, as term lengths increase your payment will decrease; however, a shorter term loan means you will pay less interest over the life of the loan.
- Annual Percentage Rate (APR) – A yearly interest rate(calculated by the average interest rate over the term of the loan) that includes upfront fees and costs associated with the loan. Use this to accurately compare the costs of different loans as fees will vary depending upon the lender, and every buyers situation is different. Make sure to make your loan work for you!
- Fixed Rate – A fixed rate mortgage allows you to lock in an interest rate that will last for the entire term of the loan. These are, generally, a good choice if current interest rates are low.
- Adjustable Rate – Adjustable Rate Mortgages (ARM) usually begin with a lower interest rate than a fixed rate, but will increase as market rates increase. A good choice if fixed interest rates are high, but make sure you are willing to have a payment that will increase over time!
- Caps – A limit to how much and how frequently an interest rate can change on an adjustable-rate mortgage. These payment caps can be periodic or extend for the life of the loan. Thank goodness for structure!
- Note – No, not like the ones we used to pass in class! This note is a legally binding written promise to repay the mortgage plus interest, which includes the name of the borrower, issuing lender, and the terms and provisions.
- Down Payment – An upfront payment made by the home buyer(you!) toward the sale price of the property, typically ranging from 5-20%. The remainder of the sales prices makes up the mortgage loan amount, excluding interest. Typically, the bigger the down payment is the smaller the monthly payment will be, and we all like small payments!
- Amortization – The paying down of principal(the loan excluding interest) over time. Generally, the principal is scheduled to be paid off, or fully amortized, over the term of the loan.
- PITI – This is a fun one. An abbreviation for the major expenses that make up a mortgage payment: Principal (the amount borrowed), Interest, (Property) taxes, and (homeowners’) Insurance.
- Escrow – The holding of funds or documents by a neutral third party prior to closing your home sale. You can practically taste home ownership at this point!
- Closing Costs – An amount of money that must be paid to close your loan, including lender fees and third-party charges, along with taxes and transfer fees. Almost there!
- Closing – The final step in the loan process when loan documents are signed at an escrow or title company. Congratulations on your new home!!