As you step onto the road of homeownership, it may become evident, securing a mortgage to finance the purchase of your property is a necessity. A mortgage loan can give you more mobility and options as you search for a home best fitting your wants and needs.
To secure a home loan, you’ll need to start with a pre-approval process in which you submit an application containing your ID information, credit history and financial information. Once you’re approved by your lender, you’re able to better budget for your home purchase and narrow down the home search.
Your monthly mortgage payments are comprised of four main units: tax, interest rate, insurance and the principal loan balance. The principal is the sum of money borrowed from the lender, while the interest rate is a fee attached onto the principal balance by the lender for borrowing their loan.
Mortgage lenders may also collect property taxes owed to the state on your behalf. Homeowners insurance is often required when you take out mortgage loans to protect your home in the case of perils and payment is collected by your lender.
A mortgage term is the length of time you agree to repay your loan balance. The most common mortgage term is 30 years, which offers lower monthly payments; however, shorter terms are available, often between 10 and 25 years.
Shorter terms come with higher monthly payments, but you can save thousands of dollars on interest.
Before committing to a mortgage loan, consider speaking with a lender to explore loan options best fitting your situation.