You may have clicked on this blog because you are able to buy a house. CONGRATS! You may have also clicked on this blog because you are nowhere near buying a house, however, you want to be educated for when you are ready too. I am proud of you for educating yourself.
When you are buying a house, you may need a mortgage. Houses can be quite expensive and the prices have been increasing overtime. The average price of a house in 1970 was about $26,650. In 1990, it was about $149,000. In 2023, the average price of a house was over $400,000. However, as of 2024, the average national salary is $59,428. So, that means it would take just over 8 years to buy an average priced house with an average salary IF you were to never touch your check and if the average price of housing did not go up. Therefore, you may need a mortgage or a rich friend who is willing to buy you a house.
What is a mortgage?
A mortgage is when a lender allows you to borrow money through a loan so that you can buy a house. Overtime, you will pay back the loan through scheduled payments.
Before getting a mortgage, you should know that there are different types. Below are SOME of the different types of mortgages.
Fixed Rate Mortgage
In a fixed-rate mortgage, the interest rate remains the same for the entire term of the loan, typically 15 or 30 years. This provides stability and predictability for borrowers, as their monthly payments remain consistent.
Adjustable Rate Mortgage (ARM):
With an ARM mortgage, the interest rate on your loan can change overtime based on market conditions after an initial fixed-rate period, usually ranging from 3 to 10 years. This can make your monthly payments be higher or lower depending on the housing market. This is a risky mortgage because you are going to want to afford your mortgage if the interest rate goes up.
Balloon Mortgage:
A balloon mortgage offers lower monthly payments for a fixed period, usually 5 to 7 years, followed by a large balloon payment at the end of the term. Borrowers often either refinance or sell the property before the balloon payment is due. The term ‘balloon payment’ is likened to a balloon holding money, which suddenly bursts, representing the sudden need to pay a substantial amount. That is how I have always remembered it.
FHA Loan
FHA (Federal Housing Administration) loans are designed to make homeownership more accessible, particularly for first-time homebuyers and individuals with lower credit scores or smaller down payments.
Overall, whether you’re on the brink of purchasing your dream home or simply exploring the possibilities, congratulations on taking steps toward homeownership! Educating yourself about mortgages and the housing market is a crucial part of the journey, and I commend you for your efforts.
As you navigate the path to homeownership, stay informed, seek guidance from professionals, and make decisions that align with your financial goals. Whether you’re ready to take the plunge into homeownership now or preparing for the future, you’re taking an important step to working toward your dream of home ownership. Best of luck on your journey.
