What Those Big Words Mean: Tips for Buying Your First Home
Buying your first home can be a great experience, but mine has been…complicated, to say the least. The market in West Michigan (where I live) is bursting at the seams with young dreamers hoping to make their first home purchase, but West Michigan is not alone! Renters all over the country are looking to buy, but are instead experiencing the stony truth of the housing shortage across the nation.
According to the Wall Street Journal, 22 of the 50 states in the continental U.S. have built too few houses to keep up with economic growth since 2000. Home construction per household remains near the lowest level within the last 60 years! This creates an unavoidable problem for a new generation that just wants a place to call their own.
If you’re looking to purchase your first home, it’s important to know the lingo! No matter what stage you’re at in the home-buying process, the terms I’ve defined below will help as you learn how to make an offer you’re comfortable with and that the sellers will love. A real estate agent will reference these definitions, but for newbies like myself, it’s nice to understand the ‘simple’ answer.
THE MONEY
Mortgage
A mortgage is a loan agreement between you, the home buyer, and a bank or other creditor. They lend you the money and you get a home. To repay the bank or creditor for providing this money, the home buyer agrees to pay back the amount they borrow to purchase the home (the principal) plus an additional amount of money as interest
A helpful Loan Calculator is located at http://www.calculator.net/loan-calculator.html
You can change the repayment terms on a loan by choosing a 15-year fixed rate mortgage instead of a 30-year fixed rate mortgage, which means you’ll pay off the loan principal and accrued interest in 15 years instead of 30. This will increase your monthly payment, but will decrease the total amount of interest you pay over the life of the loan. Note: there are many different types of mortgages! While I only mentioned a 15-Year and 30-Year Fixed Rate Mortgage, there are also variable rate and alternative loan programs like FHA (Federal Housing Administration) and VA (Veteran Affairs). Read Full Article