When purchasing a real estate property, unless paying cash, consumers typically finance all or a portion of the purchase price. This means borrowing money from a financial institution to buy a home, using the intended home of purchase as collateral for the loan.
Mortgage payments include the principal (the amount borrowed), and the interested (the amount charged for borrowing the money). Payments can be made once a month, bi-weekly, or weekly, depending on availability from the lender. A typical mortgage is for an amount that does not go over 75% of the appraised value of the property or the purchase price, whichever is lower. A minimum 25% of the purchase price is required for the down payment. However, with a high-ratio mortgage you may pay less than 25% of the cost of the home as a down payment.
Home mortgages are available from several types of lenders: banks, mortgage companies, trust companies and credit unions. Different mortgage lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You may also get a home loan through a mortgage broker. Brokers arrange financial transactions rather than lending money directly; in other words, they find a lender for you. A broker’s access to several lenders can mean a wider selection of loan products and terms from which you can choose.
It will normally only take a few days to receive approval for a mortgage, however, it is often recommended to get pre-approval for a mortgage. When you put in your offer to purchase, this is almost always on the condition of getting mortgage approval as this assures everyone involved that you are able to pay back the mortgage without defaulting.