Mortgages Listen There are many different types of mortgages. I'll cover the most popular types of mortgages here. First, I'll give a brief overview of how mortgages work.
Listen When you want to buy a house, the bank will determine the fair value of the house. They do this by getting an appraisal. One of the closing cost that you end up paying is the appraisal fee. So this isn't free. Most of the time, the appraisal will be very close to the selling price. Banks make sure to get an appraisal to protect themselves.
Listen Let's say the price of the home you are buying is $300,000. The bank will give you a loan depending on how much you make in a month minus your overall debt. If you have no debt, then you are in good shape. If you qualify for $300,000, then technically, you do not need to have any down payment. But it is good to have a down payment because it drives the interest rate down a little. But we'll explain this further down. Let's move on with how mortgages work.
Listen The bank is giving you a loan for the amount of $300,000. You do not get the deed to the house. Although you are the legal owner of the house, the bank holds on to the deed, until you pay off the loan. The most common length you borrow a house loan for is 30 years. That means, you make monthly payments for 30 years until you pay off the entire loan.
Listen Once you pay off the loan, then you have no mortgage payments. There are other options besides the 30 year term. You can choose to pay off the mortgage in 20 years, 15 years, or 10 years. But the 30 year term is the most common because this loan provides the borrower the lowest monthly payment