Skip to main content
Find Your Local Branch
Back
Scroll to top

Mortgage Basics

4 min read
Woman and son sitting on steps of house smiling at camera

Ready to talk to an expert?

Find A Location Get In Touch

You’re finally ready.

You’ve been saving up for a long time, you know how many bedrooms you want, you know what your ideal backyard looks like, and you can’t wait to meet your future neighbors.

You are prepared to purchase your first home.

As exciting as this time in your life can be, it’s important to remember that this is a very big decision. Before you take out a loan, you need to be sure that you understand the basics of the mortgage process.

Qualifying and Getting Approved for a Mortgage

Pre-qualification

If you’re going to start looking at houses, you will need to have a price range in mind. This is where getting pre-qualified comes in.

A loan officer can briefly review your information including debt, income, and assets to give you an idea of how much you will qualify for. Usually, this is a quick and simple process that can be done in person or over the phone.

Pre-approval

Just because you pre-qualify for a loan amount doesn’t mean that you will actually be able to get a mortgage for the full amount.

If you want to know exactly how much money you have to spend, you need to get pre-approved. A pre-approval means that the lender collects and thoroughly reviews all of the necessary financial information in order to commit to a specific loan amount.

Types of Mortgages

Fixed-rate mortgages

A fixed-rate mortgage means that the interest rate and mortgage payments are determined when the mortgage is taken out and never changes. These are the most popular types of mortgages and are generally 15-year and 30-year loans.

By spreading out the loan over a long period of time, 30-year fixed rate mortgages provide the borrower with lower payments.

While this may free up money for the borrower to use for other things, these loans usually come with a higher interest rate than 15-year fixed rate mortgages.

In addition, the borrower will pay significantly more interest throughout the life of the mortgage and it will take longer to build equity in the home.

Fifteen-year fixed-rate mortgages, on the other hand, offer lower interest rates but higher monthly payments in order to pay off the balance in half the time.

By cutting the loan term in half, a higher percentage of each payment goes towards the principal, helping the borrower build equity faster than a 30-year fixed-rate mortgage.

Adjustable rate mortgages (ARM)

If you’re in a position where you need low monthly payments early in the loan term, an adjustable-rate mortgage may be a good option.

Interest rates start low and increase over the life of the loan based on market interest rates. The borrower takes on a degree of risk with these types of loans as interest may fluctuate.

Components of a Monthly Mortgage Payment

Principal

The principal is the full amount borrowed to purchase a home. A borrower can reduce the amount of money he or she is borrowing by putting down a larger down-payment.

The quicker a borrower pays the principal, the more equity they have in the home.

Interest and points

Mortgage interest is the fee that the lender requires the borrower to pay in order to borrow money. In addition to interest, some lenders also charge points.

A point is equivalent to 1% of the total balance borrowed.

Property tax

In order for a community to provide public services such as roads, schools, and parks, it must require property owners to pay property tax.

This tax is based on a percentage of the value of your home.

Insurance

There are two basic types of insurance that homeowners will pay each month for their home.

The first is property insurance, which protects you against risks including fire, weather damage, and theft. Depending on the risks associated with your homes location, you may need to purchase fire insurance, flood insurance or earthquake insurance, among others.

The second type of insurance you may need for your home is private mortgage insurance (PMI). You may be required to purchase private mortgage insurance if you pay less than a 20% down payment on your home. This limits the risk to the lender, in case the borrower defaults on their loan.

Get Started!

Now that you have a basic understanding of mortgages, it’s time to start looking for your new home! If you’d like to learn more about mortgages and the home-buying process, feel free to reach out to a mortgage specialist at a First Bank branch near you.

Ready to talk to an expert?

Find A Location Get In Touch
Share:

You may be interested in...

Bank Owned Homes – Find Bank Owned Homes for Sale in Your Area If you’re in the market for a great deal on a home, a bank-owned home could be just the thing for you! With First Bank, you can easily search through a list of our bank-owned properties for sale. Bank-owned properties typically make great investments for first-time home buyers or for new business opportunities. Click here to see a list of First Bank’s available properties. About Bank Owned Homes (REO Properties) – Learn More Before You Buy A bank-owned home or real estate owned (REO) home is a home that has been foreclosed on be the mortgage lender. When you purchase a bank-owned property, you go directly through the bank, so you won’t have to deal with any homeowners. Once the mortgage lender or bank owns the property, they can evict the current residents, pay off any necessary tax liens, and make any necessary repairs. In today’s market, buying a home can be pretty expensive—especially when you add in extra costs and potential upgrades or home repairs—so if you are looking to purchase a home, but don’t have a lot of money to spend, a bank-owned home could be a good option. Bank-owned properties make great investments for first-time home buyers or anyone looking for new business opportunities. Advantages of Buying a Bank-Owned Home Bank-owned homes give real estate investors and homebuyers opportunities that are not available in the pre-foreclosure and auction phase of the foreclosure process. Some other advantages of buying bank-owned homes include: Bank-owned properties are typically cheaper than newer homes and often offer great terms like low down payments and low interest rates. Buying bank-owned homes can involve less risk and less competition than traditional markets. Bank-owned properties are typically clear of any liens against the property. The bank that owns the foreclosed property is usually the mortgage lender, so it might be easier to negotiate closing costs. Bank owned properties are typically vacant, which can save you from having to evict its current residents. For more information on bank owned homes, check out our article on how to shop for bank-owned properties. ——— Sources: Investopedia: http://www.investopedia.com/terms/f/foreclosure.asp Investopedia: http://www.investopedia.com/terms/t/taxlien.asp 2 min read
Image for tile. How a Business Credit Card Can Transform Cash Flow Management for Your Business Cash flow is the lifeblood of any business, and managing it effectively is crucial for long-term success. Whether you're running a growing enterprise in Charleston or a small business in Raleigh, a business credit card can be a powerful tool to optimize your financial health. 6 min read
6 Steps to Starting a Small Business in North Carolina First, you had an idea for a small business. Now, you want to set that idea in motion. If you are looking to start a small business in North Carolina, here are the first steps you can take to make your idea a profitable reality. Steps to Starting a Small Business in North Carolina Small businesses account for the majority of new job creation in North Carolina. They are an integral feature of the state economy and can be easily established in a few steps. Create a business plan — Clearly identify the objectives of your business and why it will be successful. Search out examples of business plans if you are unfamiliar with the process. Decide on your business structure and register your business name — Register the name of your business and the type of business (nonprofit, private corporations, LLCs, etc.) In order to operate legally, you will need to be registered as a business in the State of North Carolina. Get license requirements — Obtain any necessary licenses required for operation. Be sure to adhere to county and federal requirements, as well. Obtain the necessary tax information — In order to move forward with opening a business, you must be registered with the State and Federal taxation departments. Once you have your tax ID number, you are one step closer to opening for business. You can use this business tax information to identify your requirements. Identify sources of financing (apply for small business loans) — If you are starting a small business in North Carolina, you may need financial backing to support your first or second year of operation. This money will cover expenses such as property leasing, salaries and product stock. Find a bank that will lend to your business with a reasonable interest rate and a short repayment term to minimize the cost. Learn about employer reporting requirements and responsibilities — You’ll need to register as an employer, and for unemployment insurance and worker’s compensation insurance. You’ll also need to apply for federal and state withholding numbers. The Right Bank for Your Small Business Needs First Bank* offers the comprehensive range of financial services you need to start a small business in North Carolina. With dedicated service to our community since 1935, 3 min read
Phone with First Bank mobile app on table with coffee Is Mobile Banking Safe? Americans love their smart phones. The reasons for their adoration are seemingly endless. They Facebook. They text. They Google. They listen to music and watch movies. They take photos and video. They GPS their way to new destinations. And increasingly, they bank. First Bank has offered customers a mobile banking app since 2008, and in the recent years added increasingly popular features such as mobile check deposit, a P2P services, and financial management and budgeting tools. Unlike larger regional and national banks, who are constantly adding “shiny” new app features in an effort to draw new customers, smaller community banks like First Bank wait until the technology is more proven. It doesn’t take much longer, but our goal is to maintain a top level of security and a good customer experience. Consumers who are new to mobile banking might not realize that banking through an app is more secure than through a web browser, says Cary Whaley, vice president of payments and technology policy at the Washington-based Independent Community Bankers of America. The vast majority of fraud involves credit/debit cards and checks, rather than from mobile apps, Whaley said. With a mobile app, the bank knows with whom it’s dealing. The app typically cannot be accessed without a password or challenge question, and now, with biometrics such as a fingerprint and FaceID. “That’s pretty powerful security,” Whaley said. “We would call that 2-factor authentication.” Ready to get started with mobile banking? Download the app today. 2 min read
First Bank logo
Powered by  GDPR Cookie Compliance
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognizing you when you return to our website and helping our team to understand which sections of the website are the most popular and useful.