Select Page

How Do Mortgages Work? A Guide for New Homeowners

4 Common Mortgage Loan Types to ConsiderGetting a mortgage can seem complicated, once borrowers realize that there are several different types. With this information, potential home buyers will be able to distinguish the most common kinds of mortgages.

1. Fixed-Rate Loans

The standard mortgage loan that most people are at least vaguely familiar with is a fixed-rate loan with a specific term. The phrase “fixed-rate” means that the interest rate and the monthly mortgage payment are fixed for the duration of the loan. The term for a fixed-rate loan could be as low as 5-10 years but is typically either 15 or 30 years long. Although the borrower will pay down increasingly more principal on the loan over the years, the total payment for the principal and interest stays the same. Payments for private mortgage insurance, homeowners insurance, or property taxes may change, but the amount due for the loan itself does not. Fixed-rate loans are often preferred because they give buyers the benefit of predictability.

2. Adjustable-Rate Mortgages

Many people treat the fixed-rate mortgage as if it is the best mortgage available, but there are reasons people might consider an adjustable-rate mortgage (ARM). With an ARM, borrowers are often granted a lower introductory interest rate, which may generate a lower initial monthly payment. After a set period (usually at least a few years long), the interest rate and the monthly payment adjusts. This cycle is repeated at a defined interval, which may be every six months or a year. Although mortgage interest rates do not tend to fluctuate greatly from one month to the next, interest rates could rise significantly over a period of several years. As such, many people who start with an ARM eventually refinance their mortgages to a fixed-rate loan.

3. Conventional Lending

When home buyers start to look at homes, they may see references to the types of lending that sellers will consider. Conventional loans are frequently cited as preferred, so borrowers should understand the limits of this designation. Conventional loans are also sometimes called “conforming loans,” which means that they conform to the lending guidelines set by Fannie Mae and Freddie Mac. These are government-run organizations that buy up debt generated through conforming loans. Conventional lending usually carries specific requirements for down payments, assets in reserve, maximum debt-to-income ratio, and a limit on the size of the mortgage. Loans that fall outside conventional lending standards but are not in another specific category may be referred to as “nonconforming loans.”

4. Government-Insured Mortgages

In addition to conventional loans, potential home buyers may read about certain mortgages indicated by acronyms like FHA, VA, or USDA. These loans are insured by various departments within the federal government. The Federal Housing Administration guarantees loans for borrowers with limited ability to access conventional lending options. The Department of Veterans Affairs insures loans for current or former members of the military, with low down payment choices as a benefit of a certain amount of military service. The United States Department of Agriculture provides a guarantee for lenders who offer up to 100 percent financing for people who want to buy a home in rural areas. These loans may carry requirements above and beyond that of conventional lending, so they may not always be the ideal choice.

Choosing a mortgage means that borrowers need to know what is available to them. By understanding the difference between these types of mortgages, people can determine which mortgage will be best for their financial plans.

How to Stage Your Home When It’s Time to Sell

How to Stage When Selling Your HomeStaging is the act of making a property look move-in ready and appealing to home buyers. Staging is one part cleaning, one part decluttering, and one part decorating. Most homeowners stage in phases, beginning with decluttering and moving on to decorating.

Getting Started

Decluttering is usually the first part of staging because it’s so time-consuming. To start, go through every storage area of the house. Sort through boxes of old clothes, holiday decorations and old toys to remove those things you no longer need. Donate items to charity, recycle what can be recycled. and throw away the rest.

Remove stray papers, bills, and stacks of magazines from side tables, coffee tables and shelves. Clear kitchen items from the kitchen counters to showcase how much space your home has for food preparation. To make your home look more tidy, invest in home storage solutions like shelves and baskets where clutter can be stored.

Once the clutter has been removed from the closets, public areas and bedroom spaces in the home, then the house can be cleaned. A deep cleaning can help make the property look lighter, brighter, more cheerful and well-maintained. Clean everything from the curtains to the upholstery. Polish the silver, dust all surfaces, and clean all windows. Make your home shine!

Advanced Staging

After the cleaning and decluttering, it’s time to make improvements to the home decor. Cover bare walls with artwork, take down heavy drapes and add extra pillows to the couch or bed. Focus on improvements that bring together the decorating scheme in each room, and add things to the space that make it seem more comfortable and inviting.

For the finishing touch, set the table with a few wine glasses, place fresh flowers on the bathroom counter and play soft music in the background. Doing all of these things right before your home is shown to buyers can help make your house seem more luxurious and homey. Show buyers all the potential that your home has to offer.

How to Stage an Empty Home

Staging an empty home is a little different from staging a furnished home. Decluttering and cleaning is usually not a problem in an empty home. These tips will help you get started:

  • Remove any stains on the carpet.
  • Repaint or touch up the walls if necessary.
  • Make any necessary repairs.

Once the basics above have been taken care of, add in a few pieces of attractive furniture to make the house seem more homey and inviting. Put a dining room table and chairs in the kitchen, a love seat and chairs in the living room, and a bed with nightstand in the master bedroom. These small details can help make your home look a comfortable place to settle down.

Contact Your Real Estate Agent

Many homeowners feel a little lost when they first begin staging their home to sell, which is why it helps to work with an experienced real estate agent. Your real estate agent can show you ways to make your home look tidier, more attractive and more appealing to home buyers. If you’re thinking about selling your home, contact a real estate professional in your area to get started.

What You Don’t Know About Home Inspections

Planning for a Home Inspection Before Buying a HomeWhen it comes time to sell a property, a home inspection is necessary, or is it? This is one additional expense that may be useful but in certain cases is not a mandatory aspect in purchasing a home. In fact, some individuals buying in competitive markets may want to forgo the home inspection process to get ahead of other bidders and close on a desirable property. There is much to learn about home inspections, starting from the basics and getting into a few secrets not often disclosed to potential homebuyers.

Learn more about home inspections and what to be aware of when and if deciding to schedule a home inspection on a property today.

More Common than Before

Compared to twenty years ago, more home sales are contingent on information provided from a home inspection. The inspection is an additional fee and is not generally seen as expensive, costing buyers around $450. However, some inspectors can be considered to be overzealous and create a list of minor problems that may overwhelm owners and buyers. Sellers and buyers want to know which items are most important to address and which issues may reduce home value or impair the structural integrity of a home.

An issue with some inspectors is that they create a list with more important items and those that are generally seen as more cosmetic and those reading the list may not know which concerns to prioritize and how much necessary repairs will cost. A professional inspection should cover the foundation, framing, roof, plumbing, wiring heating systems, water heater and fireplaces. Professional inspectors who include pictures of problems make it easier to understand the extent of a problem.

Home Inspections May Be Required

In certain instances a home inspection may be mandatory. Some banks and mortgage loan products may require borrowers to carry out a home inspection. Home inspections are generally useful as buyers and investors are making a significant purchase and some issues may be addressed by the seller or help to reduce the asking price of a home.

Speak with a bank or lender and be aware of their flexibility when it comes to home inspections. There are those who forgo certain contingencies, including a home inspection, in hot housing markets. Sellers looking to close quickly may choose those buyers who are willing to do without a home inspection.

Inconsistent Regulations

A lack of national standards may make it possible for different home inspectors to have greatly varying levels of expertise. Approximately two-thirds of states have established laws helping to regulate home inspectors. This inconsistency may make it difficult to know whether or not a home inspector possesses the knowledge base necessary to provide sellers and buyers with relevant advice.

Home inspectors in New York are required to take a 140 hour course for pre-licensing. California home inspectors do not need to take classes or have a license. Find out more about regulations that may apply to home inspections in a specific state and speak with a trusted agents and friends to find out more about their experiences with local home inspectors in the area.

Learn More About Home Inspections

Buyers and sellers need to know more about the home inspection process and when skipping a home inspection may be in their interest. Talk with an experienced real estate agent to learn about general home inspection expectations and potential problems.