A home loan allows you to finance the purchase of your home. These loans are typically quite large and are more than likely the largest debt that you will ever take on.
Mortgage loans are secured using the property that you are seeking to purchase. This means that if you fail to abide by the terms of the loan, your lender can seize your your property, as they are the legal owners until the loan is paid in full. Once the lender takes backs the property, they have the right to sell it to another buyer in order to cover the costs of the defaulted loan. This process is known as foreclosure. Being involved in a foreclosure will typically damage your credit and severely hurt your chances of securing another home loan.
Home loans are typically quite large and paid back monthly, over the course of 15 to 30 years. Their payments are made up of principal, interest, taxes and insurance. Principal is the total original amount that you agree to borrow for the purchase of your home. By putting a down payment on your home, you lower the total principal amount which can therefore lower the amount and length of monthly payments. Typically, lenders require that you make at least a 20 percent down payment on the financing of your home. However, there are certain circumstances that may qualify you for a lower down payment.
Interest is the amount that the lender charges you for the loan. It is tacked onto the principal amount of the loan in the form of a yearly percentage rate that is broken down monthly and paid with your monthly payments.
Taxes on your mortgage are added onto your monthly payments. They are based on the overall value of your home and go towards funding the upkeep of your community.
When you finance a home, you are required to purchase homeowners insurance. This insurance will typically cover your home and property in cases of fire, theft, bad weather and other unfortunate circumstances.
As you can see, home loans can be complicated. It’s important to work with an experienced mortgage broker that can find and explain all available financing options for you and make sure that you understand all aspects of financing a home.
Call Mortgage Broker San Diego Now to learn about what options may be available for you!