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Tag: Interest Rate

The interest rate on a mortgage is basically a fee you’re paying to borrow money from the lender. This will be coupled to your monthly mortgage note each month until the term is over. It should be noted that most of your monthly payment will go towards the interest instead of your principal. But as the loan matures, more of your monthly payment will go towards the outstanding balance instead. Many factors can have a positive or negative effect on interest rates.

One of those things will be your credit score—the higher your credit score, the lower the interest rate, and vice versa. Needless to say, it is essential to make sure you’re paying your bills on time. My next bit of advice is to get rid of any frivolous debt. An example of such would be store credit cards with insanely high-interest rates. In fact, at a minimum, you should have only two credit cards from your bank. Lastly, you should only use them to make large purchases instead of small silly stuff.

Making a large down payment, such as 20 percent, can also lower your interest rate—unfortunately, many people, especially first-time homebuyers, aren’t able to make such a payment. Then, of course, economic conditions play a vital role as well. When people are buying homes, rates will stay relatively reasonable. On the contrary, when there is an oversupply of housing, rates will begin to rise. That’s what happened during the last financial crisis. Unfortunately, many people never recovered. Therefore, choose your mortgage wisely and be savvy with your money.

Pre-Qualified vs. Pre-Approved

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Pre-Qualified vs. Pre-Approved

Getting pre-qualified and pre-approved are the very first steps of the home buying process. Without this step, you can’t get a mortgage, meaning can’t buy a home. Unless you’re a cash buyer. Nonetheless, most people will have to go through this process before home shopping. If you’re unsure of how much you’re likely to afford, try using a mortgage prequalification calculator first.

Here’s a homebuyer tip from Bank of America: “Expect surprises! Lenders look at every detail of your finances when granting preapproval. You might be asked about a car loan payment you made with a credit card, for example. Be prepared to answer lender questions as soon as they come up.”

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What Is a Mortgage?

Home » Interest Rate

What Is a Mortgage?

A mortgage is a loan secured by the collateral of real estate. Mortgages typically have 15 to 30-year terms and can have a fixed or adjustable interest rate. The borrower is bound to make monthly payments to the principal, which is your outstanding balance. In the case that you stop making payments, the lender can take possession of the property. Otherwise known as the process of foreclosure.

All in all, the lender holds the most stake in your home. Therefore, by making monthly payments, you’re always increasing the amount of ownership in the property. Lastly, here’s a fun fact for you: The origin of the word “mortgage” is Latin and then came from Old French, which initially meant a death pledge.

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