Buying your own home dreams of every American. You could even say that is the basis of the so-called "American Dream". People without their own housing, long and hard at saving money, meticulously look for a place to live and desperate to get their own house.
Dreams of his own house is always bright and rosy. But in practice the process of buying a home often cause people to severe emotional stress. Buyers are beginning to feel the weight amount of a quarter million dollars (or more) that they will pay. They are wondering what interest rate loan, they should choose - fixed or floating. They are trying to find the best lender and are subject to verification of their ability to pay. They will have to sign a stack of documents, to communicate with a variety of real estate and invest in various unforeseen charges. Buying a home means that a person will have many years of debt. Therefore, homeowners are struggling to find the money for full repayment of the loan.
Because of all this, people often feel a strong fear of buying a home. However, a detailed examination of the buying process will help you to easily cope with this problem.
Types of mortgages
Credit for buying a home in the U.S. called mortgage. This word is often translated as a mortgage. The main two types differ in the way mortgage interest - this is a loan with a floating interest rate (Adjustable-Rate Mortgage, ARM) and a loan with a fixed interest rate (Fixed-Rate Mortgage). Rate mortgage ARM will vary with the economy. Fixed rate means that the percentage will remain constant for the entire term of the loan. More information about the loans can be found here: the types of mortgages.
The initial payment (Down Payment)
The more money you can make when buying a home right away, the less will be occupied by the amount, and the lower the monthly payment on its redemption. Most lenders require that a down payment. The magnitude of this contribution depends on many factors: on the type of lender, the loan amount, age of home, and even the state of the economy. Typically, the amount of down payment for purchase of housing represents 20% of its full value. The amount of down payment can be reduced if we make the insurance of mortgage debt. In this case, the third-party company guarantees to pay the loan in your bankruptcy. Insurance of mortgage debt does the Federal Housing Administration (a division of the Department of Housing and Urban Development). For more information about this insurance will provide you with the lender or your bank.
Gift items (Discount Points)
Some of the lenders offer to pay out so-called "discount points» (discount points), thus reducing the interest rate. Payment items will save on interest a lot of money, especially if you plan to get long-term loan. One point is usually equal to one percent of the loan amount. That is, if you take out a loan for $ 250,000, then the item will be equal to $ 2,500. When you choose to pay 10 points the lender will give you only $ 225,000, although you will have to repay all 250,000. Thus, the lender earns you $ 25,000 (but the real contribution of this amount you do not, this is in contrast to the prior payment). In return, it reduces the interest rate on the loan.
The question is, what you will end up more profitable to pay points or percentages? To do so will have to carefully calculate. It will be quite easy to do if the interest rate is fixed. In the case of ARM to make the calculation more complicated.
Usually advantageous to choose discount points when the term of the loan is not less than 6-7 years. But some believe that it is better to make a higher initial payment than agree to pay for items. So be sure to compare all the options before making a final decision.
Stay within budget
If the interest on the loan is small, and their payment is not burdensome, people sometimes begin to think about buying a larger home. However, it is important to keep fees at a level that you really can master. Financial advisors say that mortgage payments, insurance and taxes should not together exceed 30% of monthly salary. Also do not forget that the house is often in need of repair, painting, lawn maintenance, the costs of water and electricity, and other costs. You can make an estimate for the maintenance of the house, which will reflect all future costs. After that will be seen how much money you can send to repay the loan.