Did you know 65% of homeowners have a mortgage? When you’re looking to buy your first home, you’ll probably have a lot of questions about mortgages. All the information you find may seem complicated at first. Here are some common questions answered about mortgages that’ll be helpful to you.
What is a traditional mortgage?
A traditional mortgage is a mortgage that has a fixed interest rate. A majority of homeowners choose this type of mortgage. The loan is about 80% of the mortgage, meaning that you have to make a down payment on the other 20%. In some cases, it’s even possible to only have to make a down payment of 3% on a loan. The length of these loans can be anywhere from 10 to 30 years. For the entire life of the loan, you will pay the same payment amount for it.
What are the benefits of a traditional mortgage?
The benefit of having a traditional mortgage is the rate being locked in. You don’t have to have any concern with your payments increasing due to rising rates. In addition to this benefit, you also have the potential option of getting a lower interest rate by purchasing points. Conventional mortgages can be used on a variety of property including vacation homes, rental property, and a primary residence. If you choose a mortgage loan of a shorter length, you can potentially get a better mortgage rate and a reduction in interest expense.
What should the cost of mortgage payments be?
The cost of your mortgage payments should be around 25% of your income. If you borrow more than this, it may become difficult for you to meet all of your other payments. It’s useful to have a lot of money saved up for a down payment in order to get a really nice home. This will be helpful in reducing how much you’ll have to borrow. When you buy your first home, it’s best to start small and work your way up to a larger home. In general, the amount in monthly payments should be whatever you feel is most affordable and comfortable for you.
What’s the best mortgage for me?
Review all the interest options of a mortgage to find one that works with what you can afford. A mortgage broker will be able to help you determine your best mortgage options. Make sure you always carefully read the terms of a mortgage company to understand what you’re signing up for. Some mortgage lenders may have prepayment penalties attached to it. Evaluate the length options of the loan and be sure that the home you’re choosing is one you intend to live in long-term.
These are some of the most common questions asked about traditional mortgages. When you’re ready to buy your first home, keep these answers in mind to make the best decision on a mortgage. Doing so will help you to find an option that’s affordable and less stressful for you in the long run.
