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Your First Home: Step 3-Secure Financing


One of the scarier parts of the home buying process is the mortgage, it is just such a huge financial commitment. But you must remember, big risk big payoff. When you take on the responsibility of a mortgage and get to the end of the tunnel, you are that much wealthier for you and your family. That is an incredibly worthy award for the scare of a mortgage!

What is a mortgage? A mortgage is the borrowing of money (loan) secured by a real estate property (mortgage). You can obtain your mortgage loan from banks, credit unions, and mortgage broker. You start by submitting an application detailing your income, assets, and debts. Once the loan officer has all the information, they look at what financing option is best for you. Your application then goes to an underwriter and the institution decides how much they are willing to lend you. This is preapproval.

Next, talk to your loan officer about specific packages they offer. Shop referrals not rates! Even though there are a lot of numbers to consider, I am going to give you more to think about. Be prepared for closing costs (title insurance, prepaying a years’ worth of property insurance, etc) and other fees. It is always an option to ask the seller to pay the closing costs, ask your real estate agent to have that conversation.

You can get your preapproval and loan from a Mortgage Broker or a Mortgage Banker. Be sure to shop around and make sure you get the right loan for you. When shopping loans keep these three things in mind: Down Payment, Interest Rate, and Term. There are special loans for special needs as well, be sure to have an honest and open conversation with your loan officer and let them do their magic. Down payments can be a low as 5%, but are traditionally 20%. Any down payment less than 20% will require you to have PMI (Private Mortgage Insurance). A lower interest rate will save you money over the life of your loan, and also allow you to borrow more money. Lock in a good interest rate as soon as possible, and even if the interest is higher than you would like it to be-you can always refinance later. The term of the loan determines how much interest you pay over the life of the loan. In the US, a traditional mortgage term is 30 years.

What are you paying monthly? In the industry we call it PITI:

P: Principal – payment towards the loan amount

I: Interest – paid to the lender for allowing you to borrow the money

T: Taxes – property taxes paid to local goverments

I: Insurance – home owners insurance

In addition to PITI, you may have to also pay for PMI. Some areas also have HOA (Home Owners Association) with monthly dues-have a conversation with your loan officer about what your loan payment will be. Over time you pay less interest and more principal over the life of your loan.

Now that we know what you can afford and are preapproved for, let’s go to some open houses! Join us for step 4 next week.

Orange, CA-TRREG DRE#01843673-RP100 DRE#02059058-P:714-831-1800-E:info@theresultsrealestategroup.com-W:www.theresultsrealestategroup.com-Facebook - Twitter - Instagram - LinkedIn
Reference: Your First Home by Gary Keller

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Location: Orange, CA, USA

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