Getting pre-approved is the best first step in the home-buying process. This is the deciding factor of what loan type/price range you will be comfortable with, and what payment you're comfortable with. The loan type will affect which homes you are able to buy, so we need to know this information first. Once we know this, and price range, I can help setup a home search for you to find homes that match; then we can start viewing homes. Also, having the preapproval in place allows you to be ready to submit an offer once you find the right home. If you don't already have a lender, below is a list of some trusted local lenders.
GREAT LOCAL LENDERS that make it happen!
(in no particular order.)
Ruoff Mortgage-Christy Linn (269) 506-5935
Sturgis Bank & Trust-Natalie Swift (517) 227-6676
Sturgis Bank & Trust-Nella Giannandrea (269) 659-6677
Infinity Mortgage- Eric Ellison (517) 278-2100
Century Bank-Sergio Gomez (269) 651-5491
Century Bank Barry Miller (269) 273-3695
Southern MI Bank-Jodie Johnson (269) 319-4148
The modern mortgage market offers a variety of mortgage loans catering to the needs of homebuyers. The titles and details of these plans can become confusing, especially as new types are introduced continuously. You can make sense of these loan types, however, if you understand the basic principles that govern all mortgage loans. Again, you can look to your real estate professional for assistance.
Basic Principles of all Mortgage Loans
- The home is used as security to back up the loan. A lender can force sale of the home if the borrower defaults by failing to make scheduled payments.
- The larger the loan compared to the value of the home, the more risky for the lender and, often, the more expensive the loan will be.
- Interest earned by the lender always is equal to the periodic interest rate times the outstanding principle balance of the loan. The periodic interest rate is the annual interest rate divided by the number of payments in the year (usually one per month).
- The required payment usually is a bit larger than the interest due so that some of the loan principal is repaid with each payment. This process is called Amortization and is why most mortgage loans can be retired when all the monthly payments have been made.
All mortgage loans have one of the following features:
- Fixed payment and fixed interest rate - fixed rate mortgages
- Fixed rate but variable payment - graduated payment mortgages
- Variable rate and variable payment - adjustable rate mortgages
As you learn more about the types of financing available, you will notice that some loans appear to have more favorable terms. That may indicate that those loans are, indeed, bargains (and it does pay to shop around), but usually it means that those loans could have some feature that is less appealing to borrowers. For example, shorter-term loans often have slightly lower interest rates compared to longer-term loans. However, the monthly payment for the same amount of principal may be higher because of the shorter term. Variable rate loans usually have much lower interest rates to compensate for the risk the borrower accepts that interest rates will rise in the future.