If you are looking to purchase a home this spring or summer, you may be searching for an easy way to learn about your mortgage options. Or, you may be wondering what a mortgage is and know nothing about them at all!
Regardless of your current knowledge base, a quick primer on purchase mortgages can save time, money and quite a bit of frustration!
In this series of posts, we’ll cover three concepts using real numbers and supporting images. The goal is to give you a clear understanding of purchase mortgage basics – so you can easily apply new learnings as you continue your journey! Now, let’s get started!
What is a mortgage?
When it comes to purchasing a home, you’ll need to pay the current property owner for the home and cover the related costs associated with the sale transaction. Understanding how the closing costs, down payment and loan amount are related to the home sale price is an important first step in understanding purchase mortgage options.
If you are looking for a more technical definition, please read on.
A mortgage is legal document that creates a lien on a property after an agreement is reached between a lender and a borrower. The mortgage is recorded as a public record document at the local county’s office and secures the subject property as the collateral in consideration for a loan.
Now that we know a bit more about the cash needed to buy a home and how those funds will be allocated, it is time to examine home affordability by taking a look at something called a debt ratio.
Part 2: How much can I afford?