Are you looking to purchase a home or property in St. Louis? Are you a first-time home buyer or need a little refresher on mortgage loans? In this article, we break down mortgage loans to their core – what they are, how they work, and how to get one. Applying for a mortgage can be somewhat stressful, but a solid understanding of how mortgages work combined with a reputable St. Louis mortgage lender will have you living in your new home in no time! Keep reading to find out more.

First of All, What is a Mortgage?

A mortgage is a type of loan used to purchase or maintain a house, property, or other forms of real estate. The borrower issues monthly payments, which pay off the principal and interest, to the lender until the mortgage is entirely paid off. The property or home for which the mortgage is for is used as collateral – meaning that if the borrower fails to meet their monthly payments, the tenants will be evicted and the property will be seized. The lender can then sell the property as protection against some or all of the losses.

How Does a Mortgage Work?

Since most people cannot afford to pay for an entire house upfront, they will take out a mortgage with which they can make monthly payments until the property is entirely paid for. Payments count towards the principle, which is the total purchase price of the property or home, as well as the interest that accrues during the life of the mortgage loan. Once the entirety of the mortgage is paid off, the borrower has outright ownership of the property and the lender no longer has authority to claim the property.

Mortgage Types

There are several types of mortgage loans that vary by term and interest rate. Mortgage terms can range anywhere from 5 to 40 years, but are most commonly set at 15 or 30 years. Extending the term of your loan reduces monthly payments, however, it also increases the amount of time your interest has to accrue. Mortgage types differ mostly according to interest rates, and can be divided as follows:

Fixed-Rate Mortgages

The interest rate in fixed-rate mortgages remains the same for the entire duration of your loan. While this prevents your rate from being affected by inflation, it can also prevent you from potentially saving money on the total cost of your mortgage.

Adjustable-Rate Mortgages

The interest rate for adjustable-rate mortgages remains fixed for the initial period of the loan but then adjusts based on the various benchmarks, which are affected by the economy and the general cost of borrowing. This can end up being more affordable or less cost-effective depending on the benchmarks.

Interest Only Mortgages

This specific and complex type of loan is best for experienced borrowers, as it allows you to pay only interest for a specific period of time, and then pay off the principal in a lump sum or a series of subsequent payments.

How To Get a Mortgage in St. Louis

Preparing to take out a mortgage requires some preparation. Between outlining your budget and compiling the necessary documents, applying for a loan takes some time and research, as well as a trustworthy mortgage lending company!

Consider Your Budget

Ask yourself if it is the right time to purchase a home and consider how much you are willing to pay for one. Use mortgage calculators to estimate your monthly payments to see if you can afford them.

Do Your Research

When considering loan lenders in St. Louis, it’s worth doing your research. See if any of your friends and family can recommend someone (maybe you can receive a referral discount or credit!) Read reviews and get to know your lender. If you have a positive overall impression, chances are they are trustworthy.

Explore Your Choices

Once found a lender you like, you can explore your options together. Your lender will be able to guide you to a mortgage type that best fits your situation and your needs. Evaluating your income and other expenses, your lender can offer suggestions that can help you find the best-suited mortgage.

Prepare Necessary Documents

Applying for a mortgage will require a lot of documents. You’ll need to prove you have a steady flow of income and a stable job history. Your lender will check your credit score and credit history, as well as evaluate your debt-to-income ratio. If everything looks good, you will also be required to provide proof of your assets.

How Much of a Mortgage Can I Afford?

There are a few costs you need to consider when evaluating how much you can afford. Once you have all your costs laid out, you can begin breaking them down into percentages. If you haven’t found a house yet, you use the average cost of a home in St. Louis to get started. Outside of your monthly mortgage payments, you will be responsible for paying for…

• a down payment on the home,
• closing costs,
• and any lender fees.

In addition to your monthly payments, you will also have to pay for homeowner insurance, property taxes, and if applicable, any Home Owner Association fees. Don’t forget that you’ll also need money to initially furnish and stock the home.

Conclusion – Here’s Everything You Need to Know About Getting a Mortgage

Now that you know more about mortgage loans and how to prepare for one, you can begin considering which one best fits your needs and situation. Teamed up with a reputable lender, you can browse through the various types of mortgage types and choose one that best matches your ideal monthly payment amount, term, and down payment.  Mortgages may seem intimidating at first, especially to first-time home buyers, but once you understand more about their capabilities and limitations, you’ll be able to have more control over your mortgage loan of choice.