If you’ve taken a look at our website, you probably know that we’re a great place to unload a house you’re having trouble affording before buying a fully refurbished one at a very affordable price. However, we understand that not all of you are homeowners, and that some of you may be planning to purchase your first house. As you prepare to take this step, it’s important to understand some of the language involved in buying and then making the payments on a new home. This week, we’re going to discuss the mortgage.
All mortgages are the same, right?
Actually, there are several different kinds. Here, we’ll mention two of the most common. The fixed rate mortgage (or FRM) has the same interest rate for the entire term (usually 30 years) of the mortgage. The nice thing about this option is its consistency; there are no surprises, and you have a set amount of monthly interest to plan around. With an adjustable rate (or ARM) you generally start off paying less per month with a lower interest rate than you if you had an FRM, but both will go up and down (sometimes more than once a year) along with the rise and fall of the financial index they’re linked to. Examples of common financial indices are the Cost of Funds Index (or COFI), and Constant Maturity Treasury securities (CMT).
Where do I go to set up my mortgage?
There are several places you can go to get a loan and finance your home, including banks, mortgage companies, and credit unions. There are even state government lending services out there. As you choose which of these options is right for you, it helps to shop around and compare the different rates and prices before settling on the one that can provide you with the mortgage that makes the most sense for your situation. A real estate agent can be a good person to discuss your options with; if you’ve chosen to purchase your home through us, this is a process we would also be happy to assist you with. It’s important to remember that getting set up doesn’t happen overnight: the loan approval process typically takes 3 to 6 weeks.
Once I’ve chosen a lender and am good to go, what exactly does my mortgage include?
There are usually four parts to every loan. The principal is the actual amount you borrowed, the interest is what you pay the lender for lending you the money in the first place, part of your monthly costs go toward homeowner’s insurance (in case of theft, a fire, or other damaging circumstances) and of course, property taxes for the city/county you live in.
Alberta Buyers understands buying a home and setting up a mortgage can be an intimidating process, but the key to making a good decision is to understand your options. Please feel free to contact us if you’d like to know more about buying, selling or financing home, we’re happy to help.