What is a mortgage?
hat is a Mortgage?
Hello my
loyal readers I deeply believe that knowledge and information are the best
tools in order to make the right decision. Buying a house will be one of the biggest
decisions you will make in life, and because of this I wanted to share this
article from HUD.GOV. With you.Alvaro J Botero. http://www.boterorealtor.com/
#Housing101:
What is a mortgage?
Written
by: Olivia Lapeyrolerie
My parents always tell me that the biggest purchase they made in
their lives was buying our house. For a long time, I thought that my parents
were simply talking about their utilities bills and maintenance fees, when they
were actually talking about their mortgage.
I knew that a mortgage was one of the many fees related to owning
a home, but I did not know exactly what the term meant. I thought I would
figure out what a mortgage was when I went to buy my own home. The process of
buying a home seemed to have no impact on the daily life of a college student,
until I realized that my current financial actions will affect my credit score
which in turn will greatly affect my ability to apply for a mortgage.
Simply put, a mortgage is a loan people take out to buy a home.
The loan is given to potential property owners by financial institutions such
as banks or credit unions. Home owners are legally required to repay their loan
during the agreed-upon time frame, which ranges from fifteen to thirty years.
If you fail to repay the lender for your loan, the financial institutions can
repossess and sell your home to pay off the debt.
Each month, the homeowner pays a certain amount to the lender to
repay the debt. This monthly fee is a compilation of different costs. These
costs are commonly referred to as PITI, which stands for Principal, Interest,
Taxes and Insurance.
The principal is the sum of money the homeowner borrowed to buy
the home. Before this cost is calculated, the potential homebuyer gives the
lender a sum of cash, called the down payment, to reduce the overall amount of
the principal.
Interest is a percentage of the principal sum, which the lender
charges the homeowner to use the amount of money borrowed. Some mortgages have
fixed interest rates, which others have adjustable rates that change over the
course of the loan. On top of the given percentage, the lender could also
charge the homeowner additional loan costs known as points. Each point is one
percent of the principal amount. If one has an adjustable interest rate,
they may prefer to pay points instead of paying for an interest rate that may
rise over time.
While the principal and interest fees comprise the bulk of a
homeowner’s monthly payment, a mortgage could also include money that’s
deposited in an escrow or trust account to pay certain taxes and insurance.
The community where the home is located levies taxes based on the
value of your home. These taxes are generally used to help finance the cost of
running the community. Even if you have repaid the mortgage loan to the lender,
you will continue to pay taxes.
Most lenders require that homeowners take out insurance against
losses from fire, theft or other causes. These funds may be collected by the
lender or held in escrow, meaning that they will not be used unless the
obligations required are fulfilled.
The information above is a very basic sketch of what compromises a
monthly mortgage cost. For more information about mortgages and the home buying
process, please visit HUD’s home buying videos.
Shopping for your Home: http://www.boterorealtor.com/
CONTACT: ALVARO J BOTERO,PA.
MOBILE: (1)954-655-5166
CANVAS REAL ESTATE
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