Anyone new to home buying may not be familiar with certain home buying terms. For example, a cash buyer is someone who has money on hand to pay for the entire price of a home. Yes, they literally have hundreds of thousands of dollars on hand to purchase property. A homebuyer who doesn’t have cash to purchase a home will need a mortgage.
What is the Definition of a Mortgage?
A mortgage is a loan that enables a homebuyer to purchase a home now and pay the full price of the home over time. The homebuyer pays a monthly payment of years over the life of the loan. The “life of the loan” varies depending on the terms of mortgage contract between the homebuyer and lender. It may be 15, 20 or 30 years.
A mortgage requires a homebuyer to enter into a contract with a lender. A lender is someone who finances the mortgage. The contract has terms and fees included such as the percentage the lender receives for providing the home to the homebuyer.
A Homebuyer can Shop Around for a Mortgage
A homebuyer can shop around for a mortgage prior to finding the home they want to purchase. Shopping around for a mortgage involves getting pre-approved for a mortgage. A mortgage pre-approval has two purposes. It shows a home seller they are serious about buying a home. This is crucial in a sellers housing market.
A sellers housing market occurs when there are more homebuyers in Houston than homeowners selling their homes. This means cash buyers and homebuyers with pre-approval have an edge in the market over someone looking at homes without pre-approval.
The second purpose of getting pre-approval before looking for a home is knowing how much the homebuyer can afford. Many homebuyers look for a home and find the one of their dreams. Reality often hits when they can’t afford the home. With a mortgage pre-approval, a homebuyer knows the price they can afford and can find a home within their budget.
Types of Mortgage Lenders in Houston
Many lenders are available when securing a mortgage loan. For instance, banks are a great place to start if the homebuyer already has accounts with a particular bank. However, banks generally offer on a few mortgage options. So, it’s important to talk with a banker, then compare their mortgage offer with other lenders. Nonbank lenders also offer mortgage loans houston tx. These lenders are not banks, but financial institutions that offer mortgages. They are often willing to work with a homebuyer who has less than perfect credit. These are homebuyers’ banks avoid lending to because they are perceived as risky.
Mortgage brokers are the third type of “lender.” They aren’t actual advisers who walk a homebuyer through the mortgage process. They offer a wider variety of options to find a mortgage that’s right for the homebuyer. Mortgage brokers work with various lenders to find the best programs and rates based on the homebuyer’s specific circumstances.