Q : What is an amortization schedule?
A : The month-by-month allocation of your monthly payment to the loan’s interest and principal is called an amortization schedule. With most loans you pay off the interest on the loan before you pay off the principal (or the actual amount you borrowed). Your lender will provide an amortization schedule to show you how the percentage of your principal paid off increases with every payment, while the percentage of interest decreases
Q : What is a Mortgage?
A : A mortgage represents a loan or lien on a property/house that has to be paid over a specified period of time. Think of it as your personal guarantee that you’ll repay the money you’ve borrowed to buy your home. Mortgages come in many different shapes and sizes, each with its own advantages and disadvantages. Make sure you select the mortgage that is right for you, your future plans, and your financial picture.
Q : Why should I buy, instead of rent?
A : A home is an investment. When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a lot each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you’ll enjoy having something that’s all yours.
Q : How can I determine my housing needs before I begin my search?
A : Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities – things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a ‘wish list.” Minimum requirements are things that a house must have for you to consider it, while a “wish list” covers things that you’d like to have but aren’t essential.
Q : How do I know if I can get a loan?
A : You need to speak to your mortgage broker to get pre-qualified for a loan. That means you call Diane at NE Best Rate to apply for a mortgage before you actually start looking for a home. Then you’ll know exactly how much you can afford to spend, and it will speed the process once you do find the home of your dreams.
Q : How much money will I have to come up with to buy a home?
A : Well, that depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money – the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.
When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies.
The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That’s why many first-time homebuyers turn to FHA loans. FHA Loans require only 3.5% down.
Speak to your Mortgage Broker for more information on what you will qualify for and an estimated payment.
Q : Should I use a real estate broker? How do I find one?
A : Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you’ll want to know about a neighborhood you may be considering…the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you find the right home for you and your family. With immediate access to homes as soon as they’re put on the market, the broker can save you hours of wasted driving-around time. When it’s time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And most of the time, you don’t have to pay the broker anything! The payment comes from the home seller – not from the buyer.
Q : Why would I use a mortgage broker instead of a bank?
A : A bank offers mortgages so their customers don’t go to another bank and take their money with them. They offer mortgages as a convenience to their customers.
A Mortgage Broker specializes in mortgages, that is all they do. They are experts in the field and normally offer better rates than a local bank.
Q : I know there are lots of types of mortgages – how do I know which one is best for me?
A : You’re right – there are many types of mortgages, and the more you know about them before you start, the better. Most people use a fixed-rate mortgage. In a fixed rate mortgage, your interest rate stays the same for the term of the mortgage, which normally is 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your mortgage payment will be, and you can plan for it. Another kind of mortgage is an Adjustable Rate Mortgage (ARM). With this kind of mortgage, your interest rate and monthly payments usually start lower than a fixed rate mortgage. But your rate and payment can change either up or down, as often as once or twice a year. The adjustment is tied to a financial index, such as the U.S. Treasury Securities index. The advantage of an ARM is that you may be able to afford a more expensive home because your initial interest rate will be lower. Consult your mortgage broker for the right mortgage for you. NE Best Rate Mortgage offers various programs to fit each buyers needs.
Q : When I find the home I want, how much should I offer?
A : Again, your real estate broker can help you here. But there are several things you should consider:
1) is the asking price in line with prices of similar homes in the area?
2) Is the home in good condition or will you have to spend a substantial amount of money making it the way you want it? You probably want to get a professional home inspection before you make your offer. Your real estate broker can help you arrange one.
3) How long has the home been on the market? If it’s been for sale for awhile, the seller may be more eager to accept a lower offer.
4) How much mortgage will be required? Make sure you really can afford whatever offer you make.
5) How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted.
Q : What if my offer is rejected?
A : They often are! But don’t let that stop you. Now you begin negotiating. Your broker will help you. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn’t normally be expected. Often, negotiations on a price go back and forth several times before a deal is made. Just remember – don’t get so caught up in negotiations that you lose sight of what you really want and can afford!
Q : How can I find out how much homes are selling for in certain communities and neighborhoods?
A : Your real estate agent can give you a ballpark figure by showing you comparable listings. If you are working with a real estate professional, they may have access to comparable sales maintained on a database.
Q : Can I pay off my loan ahead of schedule?
A : Yes. By sending in extra money each month or making an extra payment at the end of the year, you can accelerate the process of paying off the loan. When you send extra money, be sure to indicate that the excess payment is to be applied to the principal. Most lenders allow loan prepayment, though you may want to make sure your loan does not have a pre payment penalty.
Q : What is included in a monthly mortgage payment?
A : The monthly mortgage payment mainly pays off principal and interest. But most lenders also include local real estate taxes, homeowner’s insurance, and private mortgage insurance {PMI} (if applicable). If you do not put 20% down on your home, you will normally pay PMI. Your mortgage broker will figure that out for you. It is determined by your credit score and whether it is a purchase or refinance as well as how much down or equity there is in the home.
Q : What steps need to be taken to secure a loan?
A : The first step in securing a loan is to complete a loan application with your mortgage broker. To do so, you’ll need the following information:
