Mortgage 101 for First-Time Homebuyers

Mortgage 101It’s not uncommon for a first-time home buyer to pick out a house before questioning the financial dilemmas they may encounter. As a potential homeowner, you may have a great deal of questions once you actually understand the process of purchasing a home. Essex Homes has paired with Ameris Bank to help walk you through the process of owning your first home. First, it’s important to consider and recognize the new responsibilities that will be put upon your shoulders once actually owning the home.

What are the benefits and risks of owning a home?

Benefits: Buying a home allows you to build equity (or ownership) over time. Being a homeowner will give you a sense of stability and permanence. You will have the flexibility of making home improvements to meet your needs whenever you want. You will never have to deal with raises in rent, and the interest you pay may be deductible from your taxes. Make sure to consult your tax advisor.

Risks: When buying a home, you will be responsible for paying your monthly Mortgage payment, property taxes and homeowners insurance. In addition, you will need to pay your utilities, maintenance and repair costs. Other risks may include depreciation. Typically, a home increases in value overtime, but in some cases, your home potentially could lose value overtime, meaning it is worth less than when you first bought it. As a potential homebuyer, you should be aware of this risk.

The second most important question that you should be able to answer is: what exactly is a mortgage loan?Ameris Bank Logo

A mortgage is a loan used for buying a house. The loan is referred to as a secured loan because the house is the collateral in case of a default on the home loan. This means that if the buyer is unable to make their monthly mortgage payment, the lending institution has the authority to reclaim the house.

Essex Homes partners with Ameris Bank as a lender because they are dedicated to keeping the process of buying a home as simple as possible. As a first-time home buyer, they understand that exceptional customer service provided by well-trained employees is a key necessity. Below are some of the most commonly asked questions and answers about mortgages:

  1. What components make up a mortgage payment?

A mortgage payment is formed by two elements: principal (the amount of money you borrow) and interest (the cost of borrowing the money). Depending on the lender, a mortgage payment can also contain three other elements: property taxes, homeowner’s insurance, flood insurance if applicable, and private mortgage insurance. In many cases, a lender will choose to collect a portion of taxes and/or insurance in every mortgage payment and hold it in an escrow account in order to disperse funds on behalf of the borrower to pay when this is due.

  1. How do I determine how much I can borrow? Prequalification?

A great tool for first-time home buyers is to get prequalified for a loan before shopping for a home. Prequalification is simply a way of finding out a ball park estimate of how much a lender is willing to let you borrow. When getting prequalified, there are no costs or commitments on either side. Instead, it is just a simple inquiry to help you determine a price range for house hunting. By getting prequalified, you are able to narrow your housing options, focusing only on the ones you can afford.

  1. What components affect my loan approval?

Ameris Bank has four primary components that they take into consideration when considering each loan application submitted. Income, current debt and credit history, available funds for down payment and closing costs, and the property you are purchasing.

A property appraisal will be obtained to ensure that the home you are buying is worth the sales price.

  1. What is the difference between a fixed-rate loan and an adjustable-rate loan?

With a fixed-rate mortgage, the interest rate stays the same the entire term you have the loan. The payment you make will be stable and secure. With an adjustable-rate mortgage, the interest rate changes periodically based on the market index rate, meaning your payments will also change. There are advantages and disadvantages to each type of mortgage, so be sure to talk to an Ameris Bank Mortgage Banker to learn which type of loan is best suited for you.

  1. How much money do I need for a down payment?

This depends on how much you want to pay for the home and how much money you have available. Ameris Bank offers a variety of mortgage products that can normally accommodate each borrower’s individual needs. Some mortgage programs require less stringent qualification guidelines and others require little to no down payment. In many cases, the money needed for the closing can be incorporated into the loan amount, reducing the amount of money a borrower needs to have on hand to purchase the home.

Purchasing a home can be exciting and nerve-wracking at the same time, especially for a first-time home buyer. Based on the frequently asked questions above, we recommend achieving these simple steps to make your homebuying process easier:

  • Deal with your debt now — this helps your debt ratio tremendously.
  • Penny pinch — you will need a good amount of cash just to get started.
  • Get organized — lenders require documentation. Borrower checklist of loan documents needed
  • Create a wish list — know what you want in your home.
  • Research – Know your rights and find a trustworthy Realtor and inspector.

When you’re ready to begin the buying process, visit www.EssexHomes.net and we will assist you every step of the way. For more information on home loans or how you can get started with the home loan process, visit www.essexhomes.net/financing.

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