Buying your first home is one of life’s major stepping stones. It’s an exciting experience that’s filled with promise for the future. Of course, it can also feel a bit overwhelming. That’s particularly true when you start researching different mortgage options and how they work. If you’ve never gone through this process before, the world of mortgage lending can easily be overwhelming.
Fortunately, there are resources out there to help make matters simpler and more straightforward. This quick guide to mortgage lending services is one of them. Read on for more information on mortgages that first-time homebuyers need to know.
What Are Mortgage Lending Services?
In short, mortgage lending services are lenders or financial institutions that provide loans for homebuyers. Since most people don’t have enough money on hand to purchase a home outright, they need mortgage loans to spread out the cost. Their loans pay for the homes they buy, and borrowers pay back their lenders over time. Mortgage services can also help homebuyers choose loans that dovetail with their needs and budgets.
How Do Mortgages Work?
With that being said, let’s take a closer look at mortgages and how they work. As mentioned, a mortgage is a loan for buying a home. You get a certain amount of money upfront to cover the cost of the house and property you want to buy, and you repay it through monthly installments. Repaying a mortgage loan generally takes either 15, 20, or 30 years depending on how much you borrow and the terms of the loan.
Part of your monthly mortgage payments goes toward the principal, which is the actual amount of money you borrowed. Another portion of your monthly payments goes toward interest, which is essentially an added amount borrowers are charged for using a loan. Interest rates can vary depending on several factors, including your credit score and borrowing history as well as your lender and the type of loan you have to list a few variables. Right now, they’re generally hovering between six and seven percent for basic home loans.
Looking at Different Types of Mortgages
Different types of mortgage loans are available. Conventional loans generally require good credit and down payments of around five to twenty percent of the total amount borrowed. FHA loans are government-backed mortgage loans with lower down payments. They’re often more accessible for first-time mortgage borrowers.
VA loans are for veterans and members of the military. They often come with no down payment, but eligibility is a bit limited. USDA loans are for buying homes in certain rural areas. In some cases, they don’t require down payments. Though other types of home loans are available, these are the most common.
It’s also important to point out that many mortgage loans come with either fixed or adjustable interest rates. With fixed-rate mortgages, the interest rate stays the same throughout the duration of the loan. That can make your monthly payments more predictable. On the other hand, with adjustable-rate mortgages, interest rates fluctuate based on the market. Though you may sometimes pay less interest than you would with a fixed-rate loan, you could also find yourself paying more at times.
Becoming a First-Time Homeowner
In short, mortgage lending services make it possible to buy a home without having to pay for the entire cost of the house and property upfront. They can also help guide you through the different types of loans and determine which loans you’re eligible for. They may also provide advice on qualifying for loans and help you decide which one best meets your needs. This guide and services available through mortgage lenders can help take the guesswork out of the borrowing process and get you on the road to homeownership.
