| Owning a home is a dream that many people share. | | | | is the cost of the home or land, minus the down |
| Understanding the basics is a good first step in | | | | payment that you make. Interest: Interest is the amount |
| homeownership. This article will explore a few of the | | | | of money that you pay the lender for its services. This |
| fundamental issues concerning homeownership and | | | | is above and beyond the principle amount. Interest is |
| the terms associated with the process. The vast | | | | assigned as a percentage and it may come as either |
| majority of people looking to buy their own homes | | | | a fixed rate or a variable rate. The lower the interest |
| have to rely on financial help. Generally, this financial | | | | rate on the loan, the less your payments will be. Taxes: |
| help comes from banks or mortgage lenders. Some of | | | | Many home shoppers do not realize the impact that |
| the terminology these agencies use can be confusing. | | | | taxes will have on their loan or the buying process in |
| Let's look at some of them. Mortgage: Mortgage is a | | | | general. All home buyers are required to pay property |
| term that you will hear over and over again as you | | | | taxes. The amount of the tax is often put into an |
| move through the process of buying a home. In simple | | | | escrow account where a third party will hold the |
| terms, a mortgage is a type of loan used to buy real | | | | money until the deal closes and the money is released |
| property such a home or land. In essence, a bank or | | | | to the taxing agency. When considering buying a home |
| mortgage lender will loan you the money to make the | | | | make sure you take into account the various taxes |
| purchase and they will hold the home or the land as | | | | that you will have to pay during the course of the year |
| security for the loan. When you take the mortgage | | | | or at year's end. These taxes must be paid so ensure |
| loan, the lender will hold the title to the property until the | | | | that you plan for them. Insurance: Insurance is another |
| debt is paid off. If you cannot or do not make the | | | | obligation and payment that you will be required to |
| required payments on the property, the lender may sell | | | | take on when you buy your home. The lender will |
| the property in order to recoup its money. This is | | | | require a certain amount of insurance on the home, but |
| known as foreclosure. PITI: PITI stands for Principle, | | | | you will probably want to add other types as well. For |
| Interest, Taxes, and Insurance. This is a common term | | | | instance, if you live in a flood zone you will probably |
| used during the home buying process. Down Payment: | | | | want flood insurance. Closing Costs: Closing costs can |
| As far as home loan basics are concerned, the down | | | | vary from one lender to the next so make sure you |
| payment is the amount of money that you pay | | | | understand what your lender is charging. In general, |
| upfront. In a traditional sense, the down payment is | | | | closing costs include loan origination fee, title search |
| money that you already have saved. The more of | | | | fees, discount points, survey fees, appraisal fee, title |
| your own money that you can apply to the down | | | | insurance, deed-recording fee, and credit report |
| payment the lower your payments will be. Conversely, | | | | charges. These are only a few of the home loan |
| if you make no down payment at all (or a very small | | | | basics. Home shoppers can find much more |
| one) the higher your monthly payments will be. A | | | | information on the home buying process either online |
| general rule of thumb is to have at least 3-5% of the | | | | or through a reliable real estate agent. |
| cost of the home as a down payment. Principal: The | | | | Peter Kenny is a writer for The Thrifty Scot, please |
| term principal is the total amount of money that you | | | | visit us at Bad Credit Remortgage and Cheap |
| are borrowing from the lender. In other words, principal | | | | Mortgage. |