Does the term "amortization" leave you perplexed? Are you unsure howpreapproval differs from prequalification? If so, you're not alone. Here are some mortgage basics to help you get more familiar with the process.
What's the difference between prequalification and preapproval? Getting prequalified is often the first step when searching for a home. You supply basic financial information, such as your income, assets and debts, to a lender, and the lender then provides a preliminary estimate of the amount for which you may qualify.
Preapproval involves an in-depth look at your finances and usually requires an application fee, but it gets you closer to your potential interest rate and monthly payment. Being preapproved also puts you in a better position in a competitive market because it shows you have your finances in order.
What is amortization? Amortization is the process of paying off a home loan's principal and interest over time within a consistent, planned repayment schedule. In the beginning, a large portion of each payment goes toward interest, but as the loan matures, larger amounts go toward paying down the principal.
What types of loans are there? Fixed andadjustable rate mortgagesoperate as their respective names imply. The former has a rate that stays the same for the life of the loan. The latter's rate may start low, but it can increase after a predetermined period or depending on market conditions.
Government-guaranteed mortgages include FHA and VA loans. These are usually easier to qualify for and typically require lower down payments than other types of loans.
Why are escrow accounts important? Think of them as automated savings plans. Once set up, a portion of your monthly mortgage payment goes into theescrow account. At the end of the year, there should be enough to cover property taxes and insurance.
Author:Will Redondo Phone: 985-264-1824 Dated: September 12th 2017 Views: 324 About Will: ...
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