Deciding to buy a home for the first time in Arizona can be a big step for your family. The following simple overview should help with some mortgage basics for the first time home buyer in Phoenix, Arizona.
Understanding the concept
Mortgages are what a lot of people use to buy their home. Mortgages have been instrumental in helping many people, by making that unaffordable house affordable. Some real estate investors make use of mortgages for buying properties. However, mortgages are not free money and anyone who buys real estate or plans to buy real estate using a mortgage must understand the concept of mortgages very clearly.
Down Payments and Mortgage Money
A mortgage is the money that you borrow from a financial institution or a mortgage lender for the purpose of buying a property. The mortgage generally covers a part of your purchase price and the remaining portion has to be paid by you upfront in the form of a down payment. The percentage of total purchase price that you have to pay as down payment is dependent on a number of factors and you may be able to reduce it to as low as 5%.
Many lenders will allow this type of loan based on various factors such as; credit score, documented income, property location and other factors. FHA and VA loans can reduce the down payment requirement on mortgages even further. Whatever you borrow from the mortgage lender needs to be paid back to the mortgage lender over a period of time, of course. You will also be paying an appropriate interest on that mortgage.
Types of Mortgages
There are various types of mortgages such as; fixed interest rate loans and adjustable interest rate loans. There are also mortgages with differing terms, for example you could take out a mortgage for 10 years, 15 years, 20 years, 30 years, 40 years and believe it or not, there are even 50 year mortgages available.
So depending on what type of mortgage you have gone for, your monthly payments might either remain constant (fixed rate) for the full term of the loan or keep getting adjusted periodically (adjustable rate) on the basis of a pre-determined financial index.
Closing Costs & Other Fees
Besides interest rates, there are some other costs that are also associated with mortgages such as closing costs, inspection costs, attorney fees, apprais, etc.
If the property needs some repairs, there will be costs associated with that too. Some states have mortgage taxes and transfer taxes, and it varies by state on who is responsible for paying these taxes.
So, now you can see the need to understand the concept of mortgages and the related costs clearly before you actually go forward. Understanding these concepts is really not that difficult if you enlist the help of a good mortgage adviser. Make sure you find someone you trust, after all this is one of the single largest investments you will ever make in your life.
Do not hesitate to ask a local Arizona Mortgage professional their advice. Craig Turley has been helping Arizona home owners since 1995 and is only one of a handful of individuals designated as a Certified Mortgage Consultant in Arizona.