If you have enough money to pay cash for your home in Kansas City, you can happily thumb your nose at bankers and other mortgage lenders. If you can afford to pay cash for your home, who needs them?
As for the rest us, we need to take out a mortgage to buy a home for the simple reason that doing so is the only way we can afford a Kansas City home that meets our needs. In “Home Buying for Dummies”, the chapters (5 and 6) on mortgages help all non-wealthy folk to comprehend mortgages and then choose one. (If you are wealthy and have a great deal of money to put into a property, this part of the book can also help you to decide how much of your loot to put into your home purchase.)
Let’s start with the basics…
What is a Mortgage?
A mortgage is nothing more than a loan you obtain to close the gap between the cash you have for a down payment and the purchase price of the home you’re buying. Homes in the Kansas City area you are interested in may cost $70,000, $170,000, or $370,000. No matter — most people don’t have that kind of spare cash in their piggy banks.
Mortgages typically require monthly payments to repay your debt. The mortgage payments are comprised of interest, which is what the lender charges for use of the money you borrowed, and principal, which is repayment of the original amount borrowed.
Learning how to select a mortgage to meet your needs ensures you’ll be a happy homeowner for years to come. You also need to understand how to get a good deal when shopping around for a mortgage because your mortgage is typically the biggest monthly expense of homeownership (and perhaps of your entire household budget). Paying more for interest on your mortgage than you pay for your humble abode itself is not unusual.
Suppose you borrow $144,000 (and contribute $36,000 from your savings as the down payment) for the purchase of your $180,000 dream home. If you borrow that $144,000 with a 30-year , fixed-rate mortgage at 7 percent, you end up paying a whopping $200,892 in interest charges alone over the life of your loan. That $200,892 is not only a great deal of interest — it’s also more than the purchase price of the Kansas City real estate property or the loan amount you originally borrowed!
So you don’t spend any more than you need to on your mortgage, and so you’ll get the mortgage that best meets your needs, the time has come to get on with the task of understanding the mortgage options out there. We have a lot more mortgage information on our Kansas City real estate website in our Complete Mortgage Section .
Ask T. J. Lamb , T.J. Lamb Real Estate, about taking out a mortgage to buy a house in Kansas City area.
This Home Buying Tip was excerpted from
Home Buying For Dummies (3rd Edition), by Eric Tyson, Ray Brown. © 2006 by Eric Tyson, Ray Brown, used by permission of Wiley Publishing.