For first-time home-buyers, before you think about taking out a mortgage loan from a Utah lender, you first have to make sure you understand what a mortgage is. Lenders like informed and knowledgeable clients.
When you understand what a mortgage is as well as other related matters, you give yourself an advantage when the time comes to apply.
Basics Mortgage Terms
A mortgage simply refers to a loan, repaid over the long-term, that can help a person purchase a home. Inside your mortgage, you have the “term” and the “size”. The “size” refers to the total amount you borrow from a lender. The “term” means the period of time you have to repay the home loan.
Longer Time, Lesser Monthly Payments
The term and the size of the monthly payment of a home loan have an inverse relationship. The longer your term, the less your monthly fee will be, which is exactly the reason why the 30-year fixed home loan is the most popular kind of loan.
Lesser monthly payments, however, can either be good or bad depending on your financial situation.
Components of a Mortgage
Now, the amount you pay back to your lender will vastly be more than what you borrowed because of some factors. The “principal” refers to the amount you borrowed, which you have to repay. The “interest” refers to the reward lenders get for lending you money.
Real estate taxes, which you can include in your monthly mortgage payments, fund public services. Finally, insurance can also be included in the mortgage payments.
As you have learned about the components of a home loan, you can research on amortization more. In brief, amortization shows how much you pay for each component of a mortgage indicated above.
Of course, when you choose to separate real estate taxes and insurance from your home loan, these components will be absent from your amortization.
You can push yourself to learn as much as you can about home loans. The more you know, the more bargaining power you gain once you apply for a mortgage.