Do You Need to Know About Mortgages in the USA?
Mortgages are essentially a type of loan that provides you with the opportunity to purchase a home. When you begin looking for houses in the United States, they are generally being sold for hundreds of thousands of dollars. Unless you are able to come up with the money to cover the entire cost of your home, you will be required to option a mortgage. It allows you to borrow money from a financial institution in order to buy your dream home, as long as you agree to pay it back in regular installments throughout the upcoming years.
In the past, having a mortgage may have been looked at as a burden, but in today’s society, it is most definitely a necessity. Depending on your financial situation and the bank that you sign your mortgage with, there may be different factors that you should consider prior to accepting a mortgage agreement. Although these loans can be advantageous, they can also be quite difficult. Below is the core information that you will need to know about mortgages in the U.S.
How Mortgages are Designed
There are a variety of different factors that are taken into account when structuring a mortgage. You will have to pay the taxes, insurance, interest, and principal associated with your home. These are generally referred to as PITI. If your financial institution decides that you are a high-risk borrower, you can generally pay the insurance and taxes separately from your mortgage loans and this can help to make your monthly mortgage payments far less expensive. With that being said, it is important that you save the money for the taxes and insurance so that you can pay the annual bill.
Different Types of Mortgages
There are 3 main types of mortgages available in the U.S, 30-year fixed mortgage, 15-year fixed mortgage, and an adjustable rate mortgage.
30-Year Fixed Mortgage
This is generally viewed as the most popular type of mortgage as it allows homeowners to pay a fixed amount of money on a monthly basis for 30 years in order to pay off their mortgage. The reason as to why this is an incredibly popular choice is because mortgage rates are generally lower than 15-year fixed rate mortgage and if you are able to get a mortgage when interest rates are low, it won’t change over the years. Also, if you intend on staying in your home for an extended period of time, a 30-year fixed mortgage may be your best option.
15-Year Fixed Mortgage
For homeowners that want to get rid of their mortgage at a quicker pace, 15-year fixed mortgages can be more advantageous due to the fact that they can be paid off in only 15 years. They also have the tendency to carry lower interest rates.
Adjustable Rate Mortgage
The ARM is based on interest rates that are adjusted depending on where the current market is. There are even some mortgages that are a combination of fixed and adjustable. ARMs are suggested for people who are interested in living in their home for the same amount of time as 15-year mortgage owners.