Understanding Your Mortgage: The Terms and Lingo You Need to Know

by crblog - June 8th, 2017.
Filed under: Market Watch, New Homes. Tagged as: , , .

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When you’re a first-time homebuyer, there are a lot of things you have to learn to be able to successfully purchase your first home. To help you be as knowledgeable of a homebuyer as possible, Craig Ranch in McKinney, TX is going to explain the common terms used when dealing with a home loan mortgage.

Down Payment

While the concept of a down payment surely isn’t foreign to the average homebuyer, the down payment for a car and the down payment for a house are a little different. Just like when you buy a vehicle, a mortgage down payment is a lump sum of money that you pay at the time of purchase. The average mortgage down payment is 20%. However, there are options for those first-time homebuyers that don’t quite have that much money saved up.

Interest

Nothing in this world is free, especially when it comes to borrowing hundreds of thousands of dollars for a home loan. Your interest rate will vary based on lender’s preferences and requirements as well as both you and your partner’s credit scores. Average interest rates are currently staying around 4% for a 30-year, fixed-rate mortgage.

Principal

So all that money that you borrowed from your lender will need to be paid off with monthly payments over the life of your mortgage. The amount of money that you borrowed is called the principal.

Fixed-Rate Mortgage

If you hate surprises, then a fixed-rate mortgage is what you’ll want! Essentially, you and your lender will come to an agreement on an interest rate, and that rate remains the same for the life of the loan. This can be good if interest rates were to all of a sudden to skyrocket. However, if rates were to drop, you would still be paying the agreed upon interest rate.

Adjustable-Rate Mortgage

Doing exactly as the name implies, this type of mortgage allows for your interest rate to fluctuate with the market. The good news with these types of mortgages is that they initially start with lower rates, and as long as rates stay low, then so will your monthly mortgage payment.

Closing Costs

So the down payment isn’t the only chunk of change you’ll have to put down on your house right away. While sometimes closing costs can be negotiable, it’s always safe to assume that you will be responsible for paying the entirety of the closing cost. The closing costs on your home will be generally 2% – 4% of the loan amount.

If you’ve been looking at our new homes in McKinney with Frisco schools and feel like you are about ready to take the plunge and buy a new home, come tour our master-planned community. Contact Craig Ranch in McKinney, TX today to learn more about our beautiful new homes.

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