The thought of owning your home is so exciting. Maybe you’ve already started looking at homes for sale in the Sonoma Valley; maybe you’re still just dreaming.
Either way, you need to know the basics about buying your own home—and that starts with getting a mortgage.
A mortgage is simply the amount of money you’ve borrowed from a lender to pay for a home. The lender gives the money to the seller in a lump sum, and you then owe the lender for the property.
What’s in a Monthly Mortgage Payment?
Your monthly mortgage payment will include:
- Principal: The original amount you borrowed from the lender
- Interest: The money the lender charges you to use their money
- Taxes: The money that the community requires you to pay to help with city services
- Insurance: The money required to cover your home against natural disasters, fire and other problems
- Private mortgage insurance, or PMI*
*The lender will typically only require you to purchase PMI if your down payment is less than 20 percent. You’ll only have to pay it until you reach the 20 percent equity threshold.
The mortgage company usually holds your taxes and insurance in an escrow account. When they’re due, the mortgage company pays them for you. This isn’t the case with all lenders, though, so you’ll need to double-check with yours to see if this is the way they do business.
The Annual Percentage Rate
The annual percentage rate, or APR, is the yearly picture of what the lender charges you to use their money. This figure includes the interest rate and other fees that will be included during the loan’s lifespan. It represents your total cost of borrowing money.
Many people only look at the interest rate when they’re shopping for home loans. However, it’s important to look at the APR as well.
Ready to Start HouseShopping in Dave Roberts?
Call me at 707-869-1884 or use our simple online contact form to tell us what kinds of homes are on your radar. I’ll be happy to set up a custom search and help you find the perfect place for you and yours.
What is a Mortgage