If the word mortgage gives you the chills or makes you scratch your head, you are not alone. Whether you are new to homeownership, or you’ve been-there-done-that but your knowledge bank is covered with dust, many people are afraid and/or confused about mortgages.
What is a mortgage? A mortgage is a loan for a house, property, or real estate. The person who seeks a mortgage loan is called a ‘borrower’. A borrower signs a (lengthy) agreement with a lender (like a bank) so that they can purchase a property. The actual property is used as collateral until the lender is paid back in full. People across America can’t afford a home outright because of the high cost. Mortgages allow many families to have the American dream!
Here are some quick facts to shape up your understanding of mortgages.
- 30-year Mortgages: A standard, attainable (for many) loan is a 30-year mortgage agreement. 30-year mortgages spread out payments over the timespan of (you guessed it!) 30 years. This allows the payments to be more reasonable for the average family. 30-year mortgages haven’t been around forever. In fact, before the Great Depression, mortgages were harder to get and maintain. In the past, they required a larger down payment, which made it impossible for some people to enter into a mortgage. They also had a shorter maturity rate and the terms of the loan changed over time.
- Interest is Good in 2020: When you compare typical interest rates in 2020 with those of the past, mortgage interest rates are good. Compare modern day rates with those of the 1980s. In those days, while there were fixed-rate mortgages available, the interest rates were around 20%! Today, they are usually 5% or less. Having such a great rate available is a great reason to seriously consider homeownership.
- Shop Around: Mortgage rates vary depending on the lender. Since this is a big decision, it is a good idea to shop around a little. Also keep in mind that there may be some added costs here or there to make up for the smaller percentage. It’s smart to look at established local banks and credit unions for your comparisons. The person you work with is also very important because you will want them to have a fast response rate, patience, and a great ability to explain things.
Beef Up Your Credit: As with most loans, good credit can save you on interest rates. When you are considering a new mortgage or even a refinance, do not open any new lines of credit and make sure to make all your payments on time. Also, pay down your debts as much as possible to get the best score you can. A better credit score can save you bit time. However, if you have less than perfect credit, that doesn’t always mean you can’t own a home! For a conventional loan, you are required at least a 620 credit score and with a FHA loan, you can have a score in the 500s. Do the best you can with where you are at!
- Stay Local- Keep your money in your community and find someone you can trust and speak with face-to-face. Your loan officers at Porter Bank have mortgage options for you with competitive rates! It’s our pleasure to help you find the best fit for you and your family. Call us today or begin by applying online Mortgage & HELOC Application