Mortgage 101: Basics Every Home Buyer Should Know

Buying a home is no small ordeal. 

It’s an important right of passage for many people in their financial lives. 

But it also signifies an increase in your status and security as a human. 

Buying a home, in many ways, signifies that you’ve successfully ‘arrived’ as an adult in our country and culture. 

But this doesn’t necessarily make it ‘uncomplicated.’ 

In this blog post, you’re going to learn some important, basic information about the mortgage and home-buying process. 

Hopefully, it’ll point you in the proper direction when it comes to remembering important stuff that’ll be crucial to understand later on—when the time comes to sign on the dotted line and close on your new home. 

Let’s dive into it. 

1. There’s A Primary Mortgage Market And A Secondary Mortgage Market

A lot of people are confused by this terminology. 

But these quotes by LeverageRX help to explain it in some easy-to-understand lingo:

“The primary mortgage market is where a homebuyer secures a loan through a lender… The secondary mortgage market is where money is made. Investors and lenders buy and sell mortgages to earn profits on the loans and the servicing fees they generate.”

Most people have at least a basic understanding of the primary mortgage market. But most people don’t even understand the reasoning behind the secondary market. 

Well, as it turns out, the secondary mortgage market is useful because it helps to create liquidity in the primary mortgage market—which basically makes it easier for borrowers to get home loans at reasonable interest rates. 

It’s kind of nifty, right?

2. You’ll Need To Get Pre-Approved For A Home Loan

If you have a steady job, a steady income, a decent work history, a good credit score, and an absence of existing high levels of debt—you’ll probably find that getting pre-qualified for a mortgage from your bank is a pretty easy ordeal. 

Of course, it’ll be more difficult if you’re self-employed, own your own business, or have a bad credit rating. 

But hey—sometimes, it pays to jump through a few hoops, right?

3. You’ll Probably Need To Put Some Money Down

While it might still be possible to get a home loan in some cases without a down payment, it’s not very likely in this day and age. 

You’ll generally need a lump sum of cash totaling somewhere between 10% and 20% of the purchase price of the home to use as a down payment. 

Nowadays, that can add up!

It’s not always necessary to have a big down payment. But saving up for one, and having it on-hand, can give you some pretty serious leverage and better options when the time comes to negotiate a deal. 

4. Take Your Time Finding A Lender

Finding the best lender for your home-buying experience is actually really important. 

Here’s the thing:

You don’t want to just randomly choose a lender without knowing for sure that they’ll offer great customer service and really help you through the home-buying process. 

This is especially true if you’re a first-time home buyer. 

For best results, make sure that you find a lender who seems completely willing to help you answer questions.

Also find someone who is willing to help you walk through all of the issues, and who will help you to navigate each step toward the end goal. 

This actually matters a lot! 

5. Make Sure You’re Ready To Buy

Some people love the ‘idea’ of buying a home. 

Then, once they actually finalize the sale, they panic—and they think to themselves:

“Wow, now I’m stuck. What did I get myself into?”

So, here’s the thing. 

Buying a home isn’t necessarily going to be the ‘right’ choice for everyone. 

If you’re not ready to put down some semi-permanent ‘roots’ in your life, then you should probably just stop and think about whether or not this is really what you want (at least for the time being). 

• Do you want to travel the world?
• Do you like the idea of spontaneously moving to a new place?
• Do you want to work on the road?

Granted, you can do these things as a homeowner. But they do become a bit more complicated. 

Conclusion

There you have it. 

Some basics about home buying that every home buyer should know before they sign that dotted line. 

It isn’t rocket science. But doing a little bit of reading about it never hurt anyone. 

You’ve got this. 

Now get out there and make it happen

Good luck.