Home Loan and Lending Terms to Know
Whether you're a first-time homebuyer or seasoned in the real estate game, navigating the terrain of home loans involves grasping various elements—from prevailing interest rates and contractual specifics to the array of loan options tailored to your needs. In this blog post, we've compiled a vital glossary of loan and lending terms to equip you with foundational knowledge for a smoother journey through the process of purchasing a new home.
Important Home Loan & Lending Terms
Term. Mortgages are generally available at 15-year, 20-year, or 30-year terms. In general, the longer the term, the lower the monthly payment. However, shorter terms mean you pay less interest over the life of the loan.
Fixed vs. adjustable interest rates. A fixed-rate allows you to lock in a low interest rate as long as you hold the mortgage and, in general, is a good choice if interest rates are low. An adjustable-rate mortgage (ARM) usually offers a lower rate that will rise as market rates increase. ARMs usually have a limit as to how much and how frequently the interest rate can be increased. These types of mortgages are a good choice when fixed interest rates are high or if you expect your income to grow significantly in the coming years.
Non-traditional mortgages. Also sometimes called “exotic,” these mortgage types were common in the run-up to the housing crisis, and often featured loans with low initial payments that increase over time.
Balloon mortgage. This is a form of non-traditional financing where your interest rate will be very low for a short period of time—often three to seven years. Payments usually only cover interest so the principal owed is not reduced. This type of loan may be a good choice if you think you will sell your home at a large profit in a few years.
Government-backed loans. These loans are sponsored by agencies such as the Federal Housing Administration or the Department of Veterans Affairs. They offer special terms, including reduced interest rates to qualified buyers. VA Loans are open to veterans, reservists, active-duty personnel, and surviving spouses and are one of the only options available for zero down payment loans. FHA loans are open to anyone, and while they do require a down payment, they can be as low as 3.5 percent. Drawbacks include a slower loan process and—for FHA loans—the need to pay mortgage insurance.
Be Sure to Do Your Homework
As the housing market shifts, so do lending practices. A mortgage broker—an independent professional who acts as an intermediary between you and lending institutions—may be able to help you find a better rate than you can on your own. Also, be sure to shop around; slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment.
It is important to do your research and understand what options are available for you. Many home buyers do not take the time to get prequalified for a new home loan. They also often do not take the time to shop around to find the best mortgage for their particular situation. It’s important to ask plenty of questions and make sure you understand the home loan process completely. You can learn even more about the process pre-approval process and what to expect here.
More Helpful Resources
If you would like to learn even more about lending and home loans, our local market, and the entire real estate process, we have many videos with local experts available. Just visit our YouTube Channel and be sure to subscribe to our channel for the latest real estate videos. If you have any questions or want to get started with the pre-approval process for a home loan please do not hesitate to contact me. We have a list of preferred, local lenders that we are happy to help connect you with to get you started. We also have a helpful page on our website where you can learn about the home loan pre-approval process and the requirements.
The Angst Real Estate Team
Looking for an experienced Real Estate Team in Reno/Sparks and Northern Nevada? Look no further than Ken Angst and his team! With a demonstrated history of success working with buyers, sellers, and investors, we are the top authority in the area. Stay up-to-date on the latest trends and topics in the Reno/Sparks real estate market with our weekly podcast, designed to provide you with the information you need to make informed decisions. Whether you're looking to buy, sell, or invest in property, we have the expertise you need to achieve your goals. Contact us today to learn more! 775-525-0309
S.168655
#AngstRealEstateTeam #LoansandLending #HomeBuying #Mortgage #LivingInSouthReno #HautePropertiesNV #HomeLoans #RealEstate #FirstTimeHomebuyer #LoanTerms #InterestRates #LoanOptions #FinancialLiteracy #MortgageTerms #PropertyOwnership
