Purchasing a home for the first time brims with excitement–and also questions. From selecting the best neighborhood to ensuring you find a seasoned, reputable real estate agent, it brings up plenty of inquiries. Chief among them? How to receive the loan you need to acquire ownership.
Brentwood real estate pro Keri White has over 17 years of experience in answering this question. Read on for her expert guide through the mortgage world and the role it may play in your home search.
What is a Mortgage?
“Mortgage” is often tossed about in conversations about real estate and beyond. So much so we may not pause long enough to ponder what it actually is–and how it affects us. And yet, it will be useful for you to know as you enter the real estate market.
In the simplest terms, a mortgage is a loan that is “secured” by a real estate property, which acts as the collateral behind it. Meaning if you default on your mortgage payments, you may lose this collateral–much in the same way a car is repossessed if you miss several payments on your car loan. As with other loans, a mortgage has interest attached to it–or the price you pay to borrow the sum. Learn more about mortgages. Ring me today!
What Are the Current Interest Rates?
Mortgage interest rates have risen in the last several months; as of November 4, 2022, they are 7.35% for a 30-year fixed rate mortgage and 6.51% for a 15-year fixed mortgage rate. Bear in mind that these rates are contingent upon your credit score. Forbes reports that the most attractive rates are given to buyers with a minimum credit score of 740. If your credit score is less-than-stellar, you may be able to qualify for a loan with the Federal Housing Agency, among other government-backed lenders.
Are Fixed-Rate Mortgages My Only Option?
In a word, no: There are also adjustable mortgage rates, which may render your mortgage payments more feasible in the immediate but pricier in the long term. There are interest-only mortgages, too–a rarer breed of a loan that might require a substantial balloon payment at the conclusion of its lifespan (and which fell out of favor after fueling the 2008 recession).
What is Fact and Fiction When it Comes to Mortgages?
There are dozens of myths and misperceptions surrounding mortgages–namely, that a preapproved mortgage is a guarantee. Unfortunately, it doesn’t work that way. The truth about mortgages is that a preapproved loan is still subject to additional factors; if you lose your job between the time of seeking preapproval and applying for a mortgage, for example, you may not qualify for a loan. However, securing a preapproved mortgage prior to shopping for a home is always a wise idea in that it will give you an understanding of your financial parameters. Don't let misconceptions about mortgages hold you back from achieving your dream of homeownership, call us today!
Do I Need to Have a 20% Down Payment to Purchase a Home?
An untold number of homebuyers are under the impression that they need to save up 20% for a down payment before they can purchase a home–a figure that may sound outrageous amidst inflation and rising rent costs across the nation. The good news? While 20% may be ideal, it’s not always necessary. Some may be able to purchase a home with as little as 3% down. That said, if you put less than 20% down and/or use a conventional loan for your down payment, you may have to pay for private mortgage insurance (PMI). PMI is deemed a “supplemental” form of insurance and operates as a form of assurance with your lender. This premium is usually added to your monthly mortgage payment. It’s important to note that you can halt private mortgage insurance once you own at least 20% equity in your property. Explore the possibility of purchasing a home with less than 20% down and understand the implications of private mortgage insurance. Learn more with me!
What are Closing Costs - and What do They Have to do With a Mortgage?
Basically, closing costs refer to the fees you pay your mortgage lender and other professionals–such as a real estate attorney–for their time and efforts. These costs may also include title insurance and homeowners insurance, application fees, and courier fees, among other costs. Generally, closing costs range between 3% and 6% of the amount you have borrowed to assume ownership of a home. While this may seem overwhelming once you take into account the cost of your down payment and your earnest money deposit–or the amount you put down with your purchase offer to demonstrate the seriousness of your offer–keep in mind that your closing costs must, by law, be revealed to you before a transaction is completed. Call me today to discuss how to budget for closing costs and ensure you have a solid understanding of the fees associated with purchasing a home.
What are Points on a Mortgage During Closing?
If you’ve been conducting research on the different types of mortgage loans, you may have seen “mortgage points” make their way into the conversation.
There are two distinct types of mortgage points: discount points and origination points, and they’re employed when you close on a loan. Origination points are to pay the lender for developing the loan and cover the costs of the loan officer’s time and expertise; discount points are to pare down the mortgage interest rate. They are usually 1% of the amount you’re borrowing. For example, if you’re taking out a $750,000 mortgage for a home in Santa Monica, your origination point would be $7,500. The first is usually paid during closing; the second is up to you as the buyer and whether you would like to pay a lower interest rate and monthly fee. Contact me today to discuss whether paying mortgage points is the right decision for you when closing on a loan.
Can I Pay Off My Mortgage Early?
Say you received a fixed mortgage loan for thirty years, allowing you time to pay off your home in doable increments. But what happens if a huge promotion arrives or you receive a substantial inheritance? Except in rare cases, where lenders charge a penalty for paying off a mortgage early, you can pay off your mortgage–and experience the freedom that arrives with it.
Ready to take your real estate goals to the next level? Keri White, a Realtor, is keen on working with first-time home buyers and prides herself on providing her clients with education on mortgages and all other matters involved in the home-buying process. With extensive real estate experience throughout LA, she can be your guide, confidante, and teacher. Reach out to her today to watch your dreams transform into reality.
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