Rent Management Software: Past, Present, and Future
Rent isn’t what it used to be. Before the world went digital, landlords physically collected rent payments from each tenant. Sometimes, a tenant ...
According to Investopedia, a “mortgage is a type of loan used to purchase or maintain a home, land, or other types of real estate.” The borrower commits to paying their lender over time in a series of regular payments that are divided into principal (the original amount of money borrowed) and interest (“monetary charge for the privilege of borrowing money, typically expressed as an annual percentage rate (APR),” says Investopedia). The property or land becomes collateral to secure the loan.
A mortgage allows individuals and families to purchase property with only a small down payment (relative to the full price of the property), effectively borrowing the difference and promising to pay it back over time.
You must apply for a mortgage loan through your preferred lender, meeting all of their requirements. Though qualifications vary, Freddie Mac explains that lenders will establish the risk in lending to you by examining the four C’s:
There are a variety of loans available for borrowers, making it crucial for you to find a lender you trust. Explain your goals, and your lender should be able to find the mortgage product that best aligns with your plans. That said, it’s worth knowing your options!
The most common types of mortgages are 15-year and 30-year fixed-rate mortgages, meaning that the interest rate and monthly payment amount stay the same for either 15 or 30 years. This type of loan is also called a traditional mortgage.
Within this category fall:
Another type of loan is the adjustable-rate mortgage (ARM) in which the interest rate is fixed for an initial period of time, after which it can change on a set schedule based on current interest rates. The initial interest rate is usually below market but rises substantially, meaning that the loan may be more affordable in the short term but more expensive in the long term (if rates rise).
Investopedia notes that ARMs typically have limits on how much the interest rate can rise each time it adjusts and in total over the life of the loan. When reviewing ARMs, they’re often represented by a fraction.
For example, you may see a 5/1 adjustable-rate mortgage. That means the ARM maintains a fixed interest rate for the first five years, then adjusts each year after that point.
If you’re interested in learning more, we’ve put together a free webinar to help you learn more about financing options to purchase propert
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