Get to Know the Language: Mortgage Loans in Baton Rouge
Ready to purchase your first home? Then you’d better get up to speed on the terms you’ll see flying around as apply and get approved for mortgage loans in Baton Rouge. Essential Federal Credit Union has been a provider of mortgage loans in Baton Rouge for decades and we’ve got the expertise to make sure you have all the information you need to make a smart mortgage decision.
What is a Mortgage?
Let’s get started with the most obvious and maybe most important word: Mortgage. The simple and easy answer: a big, fat loan. Probably the largest loan you’ll be responsible in your entire life and the loan that will take you the longest time to repay. A mortgage is a big responsibility to take on, but it is also what enables the majority of American’s to purchase a home. After all, there are very few people who are just sitting around with enough money to pay for a home in full, in cash. Either that person is very rich or that house is very cheap.
But, as you might have guessed, gathering the finances to pay for a home isn’t as simple as securing the mortgage. There’s also the down payment.
What is a Down Payment?
A down payment is an amount of money that you pay at the time of purchase. It represents a certain percentage of the cost of the home. A typical down payment is 20%. So, if you were to purchase a home for $100,000, the down payment would be $20,000 and your mortgage would cover the remaining $80,000. You will have a certain amount of time to repay that $80,000 mortgage, it’s important to understand all that’s involved in your monthly mortgage payment.
What is a Monthly Mortgage Payment?
Your monthly mortgage payment will encompass your principal, interest, taxes and PMI.
Principal: the amount borrowed. Every month you will pay back a portion of the theoretical $80,000 of your mortgage loan. That amount will depend on the length of your mortgage. For example, if you had a 40 year mortgage, you would be paying $2,000 of principal each month.
Interest: Just like all other loans, mortgages accrue interest and this interest will be a part of your monthly mortgage payment. Interest rates depend on many factors including credit score, so speaking with a representative for mortgage loans in Baton Rouge (like an Essential Federal Credit Union representative) will help you get an idea of the interest rate you can expect.
PMI (Private Mortgage Insurance): PMIs protect lenders in the possibility that you default on your mortgage loan. As a provider of mortgage loans in Baton Rouge, Essential Federal Credit Union only requires PMI for Fannie Mae Conventional Mortgage Loan, when the loan exceeds 80% loan to value.
What is an Escrow Account?
Escrow accounts pay out your taxes and insurance when they are due, once a year. Once a month, you will be paying one twelfth of payout amount into your escrow account as part of your monthly mortgage payment. Escrow accounts are only required for first time mortgage holders.
Ready for your own Mortgage?
So there you have it. The very basics of mortgage loan vocabulary to start you on your home purchasing journey. Should you have more questions or more terms you need defined, reach out to one of our agents today. Essential Federal Credit Union is proud to provide mortgage loans in Baton Rouge and we are eager to help you with yours. Give us a call at (225) 353-8238 or send us an email today!