If you are a first-time homeowner, or even someone in the market for a new house after several errors, you should be aware of a few facts about mortgages before you begin house hunting. The more you know about mortgages and the people you will be working with, the better prepared you will be when it comes time to negotiate the best rates for a mortgage. Even though many people believe they know a lot about mortgages, when real estate agents were surveyed, there was much more to learn than homebuyers expected. Here are a few examples.
Did you Know?
- A mortgage is the most common payment method if you want to buy a house. A mortgage is used by nearly nine out of ten buyers when making a purchase. The typical deposit is 10%, with the remaining 90% coming from the lender.
- Do you see a red door anywhere? Painting your door blue isn’t necessarily a bad idea in cultures where evil spirits aren’t prevalent, as the color is thought to keep away bad luck. However, in Scotland, once you’ve paid off your mortgage, the front door is sometimes painted red as a way to show off your accomplishment of becoming a full-fledged homeowner.
- Mortgages are a major contributor to personal debt. When it comes to personal debt, most people list their mortgage as the largest single item, followed by credit card debt and then student loans and auto loans. This is followed closely by medical expenses.
- It has ties to death. It’s not commonly known that the word “mortgage” comes from the old French words “mort gaige,” which literally translates as “death pledge.” The loan “dies” when the mortgage is paid off.
- There’s no commitment to put any money down. About 12% of buyers do not put down any form of down payment. In 2007, the number of first-time homebuyers who did not make a down payment rose to its highest level, and (although not always a good thing) no money down mortgages are becoming more popular again in recent years.
- The mortgage cost can be more than the value of the home. The contract can be up to 97 percent of the home’s value in the United States, although people can, as mentioned above, get a mortgage for the full amount. People can borrow up to 110% of the value in the UK and up to 115% in the Netherlands.
- Freddie and Fannie, the royal couple. President Franklin Roosevelt established Fanny Mae in 1938 to free up capital for lenders during the Great Depression. Freddie Mac was established in 1970, immediately following Fannie Mae becoming publicly traded. About half of all mortgages in the US are now guaranteed by these two organizations, which have now merged.
How Much Do You Know?
Mortgages are a subject about which most people are ignorant. Individuals often believe they know everything there is to know about mortgages. Still, a CNN Money poll found that most respondents had no idea what terms like “30-year fixed rates,” “annual percentage rate,” or “variable interest rate” meant when they heard them. Lenders can charge whatever rates they want and require any number of qualifications or background checks, which is why it is important to shop around for the best mortgage that you can find.
The information presented here is certainly eye-opening, with some of the details being more useful in the real world than others. To get the best deals and rates possible, you should use online mortgage comparison articles, shop around and speak with lenders in person, and check your local library for books on first-time home buying and how to apply for a mortgage to arm yourself with the best information you can find, to get the best deal that is right for you.