Home Business Mortgage 101: Some basics you should know

Mortgage 101: Some basics you should know

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Buying a home for the first time is not easy, especially if you have been living on rent for so long. With years of savings against all odds of inflation, many people opt for mortgages. Since getting a home is important for many people, the US government makes new policies from time to time regarding low and no-down payment mortgage coverage. 

According to a survey, more than six million people buy properties each year and that includes many people who are switching from renting to owning a home for the first time. If you are one of those people, here we will be sharing a mortgage 101 basics that could be useful to you.  

Understanding the term mortgage

A mortgage is a kind of loan that is used to finance a home. In the US, more than 87% of homebuyers use mortgages to buy their homes. It is popular because so many people don’t have enough money to buy a home in the first place. Also, mortgages don’t need to be paid off quickly as most of them can go long for 30 years easily.

Some important terms mentioned below can help you understand the mortgage better. 

  1. You can apply for a mortgage through a bank or any other financial institution. Whoever lends you the money for the home will be regarded as lender. 
  2. Once you receive the funds, you will be known as borrower.  
  3. A percentage amount of the home’s sale price needs to be paid, that amount is called down payment.   
  4. The amount of money you owe to the lenders is often called principal. 
  5. Whenever you take a loan, you have to pay it back with some interest. For mortgages, there are special interest rates.  
  6. The amount of time in which you have to pay back your loan is called loan term. 

How does a mortgage work?

The process of a mortgage is still the same as any other loan you take. You need to pay it back in installments every month until the loan term of your mortgage. Usually, lenders grant a 15-day grace period to those who pay their installments late and then process the installments. Many homeowners use autopay features to prevent late payments these days. 

To take a mortgage, you don’t necessarily need to have a bank account or any other relationship with the bank as you can get the mortgage loan from any of the following places:

  • Local retail bank branches
  • Local mortgage companies near you
  • Online mortgage lenders

It is recommended to apply for a mortgage loan early and before you find a home to buy. 

Types of mortgages

In the US, there are 5 types of mortgages and each one has different terms and conditions. Based on different criteria, people can qualify for one of these 5 mortgage loans. 

  1. Conventional mortgages
  2. FHA mortgages
  3. USDA mortgages
  4. VA mortgages
  5. Portfolio mortgages

Lastly, being educated on the matter allows a person to avoid scams and understand his or her situation better. Steven Tulman tells about commercial mortgage opportunities but for a home mortgage, you can always find more on Google. 

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