If you're planning to buy a home in the Triangle area of North Carolina, congratulations! This is a wonderful area for many reasons, and you've just made an excellent decision to join one of North Carolina's most exciting communities.
Whether you're a first-time homebuyer or a seasoned real estate investor, you're probably planning on taking out a loan to pay for your new home. On this page, you'll find a handy breakdown of different mortgage types, financing options, and recommendations for local lenders. Feel free to bookmark this page to use as your mortgage guide for your upcoming home search.
Have any questions about buying a home in the Triangle? We're here to help. Simply give us a call today to get started.
Your Mortgage Breakdown
Simply put, a mortgage is a loan for the amount of money your home is worth. There are a number of different mortgages available, depending on your financial situation, with options for monthly payments and interest rates.
How much you'll end up paying every month depends on that type of mortgage. Conventional fixed-rate is the traditional loan, and is what most people think of as a "mortgage." Fixed-rate means the interest rate stays the same over time, meaning every month you'll pay the same amount. Monthly payments are made up of the principal payment on your mortgage loan, interest payment, and homeowners insurance.
Other types of mortgages include adjustable-rate. With an adjustable-rate mortgage, your interest starts off low in the beginning and gradually increases over time. This means inconsistent monthly payments.
Which type of mortgage is best for you depends a lot on your financial background.
In the meantime, here's an overview of the most common loans out there:
- Oldest and most popular
- Rate is constant over the life of the loan
- Can be taken out in 10, 15, 20, or 30-year lengths
- Interest rate fluctuates
- Are tied to one-year Treasury bills or another specific index
- Initial rate is low, but grows each year
- Usually a cap of two points; lifetime ceiling caps of around six points
- Rate can drop
- Pre-set spending limits
- Amounts are set by the median prices of different cities within a particular area
- Only 5% down is required (sometimes 3%)
- Steep mortgage insurance premium and other upfront costs are required
- Designed to help military vets buy homes with no down payment
- Not allowed to pay points; responsible for some fees
- Seller usually has to pay the extra money
- Usually called 5/25s and 7/23's
- Convertible converts the loan to a fixed loan for the remaining 25 or 23 years
- Nonconvertible - converts the loan to an ARM
- Both are 30-year loans
- Fixed interest rates for the first 5 or 7 years; then change to convertible or nonconvertible loans
- Both can be amortized over 30 years
- Riskier than fixed rates, but less risky than ARMs
- You pay half the amount of a monthly payment
- Paid 26x a year (not 12x monthly)
- Cuts down on the amount of interest over the life of the loan
- Paying so often can be a drawback
A Quick Guide to Financing Your Mortgage
A great way to plan your mortgage and set your budget is by getting pre-approved for a mortgage. During this process, you'll sit down with a lender to review every aspect of your finances. The lender will go over your annual income, any outstanding debts you may have, your assets, and credit score. Then, they'll let you know exactly how much the bank is willing to lend you.
There you go, your budget is set! We can't recommend becoming pre-approved for a mortgage enough, because you get all these benefits by going through the process:
It lets you know exactly how much financing the bank is willing to loan you
You'll know what your potential maximum mortgage payment will be
You'll know how much your down payment will be
It makes you a more competitive buyer to sellers
Need a Triangle area lender? I've got you covered. Simply give me a call for some local recommendations. In the meantime, feel free to play around with this mortgage calculator, to get a feel for how much you might be spending per month on a mortgage.
Any Other Questions?
My team and I have answers. If you're thinking of buying a home in the Triangle, we should grab coffee. I would love to connect you with home-buying resources or sit down to discuss your future plans.