If you’re in the process of looking at homes for sale in Sierra Vista or Fort Huachuca, you probably already have a long list of things you want to research before making a final decision. But while it’s important to research the communities you’re looking at moving into and the home builders you’re thinking of buying from, there are some fundamental elements of buying a home that shouldn’t be overlooked. For instance, do you already know everything about a mortgage? Considering that a mortgage is likely to be one of the largest debts you’ll ever take on, it’s important that you fully understand the working parts of a home loan.
Collateral
When you take on a mortgage, you are in effect signing a legal contract promising to repay the loan plus interest and other costs. The home you are purchasing acts as collateral for that agreement, which means the lender has the right to seize the property and sell it to cover the debt if you stop making payments.
Principal
In a mortgage, principal refers to the total sum of money originally borrowed to buy a home. Your mortgage payment will largely be affected by the amount of principal, so it’s a good idea to put down at least 20 percent or more of the home’s purchase price to lower the principal amount and the resulting monthly payments.
Interest
As previously mentioned, a mortgage is a promise to repay the loan amount, or principal, plus interest. Effectively, interest is what a lender charges you to use the borrowed money. Interest is expressed as a percentage called the interest rate. A large down payment and a good credit score can help you secure a very competitive interest rate.
Castle & Cooke Arizona builds some of the finest new home communities in Southern Arizona, and we’re happy to answer any questions you have about the home buying process. Visit our website to browse our new homes for sale in Sierra Vista or call us at (520) 378-5110 with any questions you may have.