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Everything Bayonne Home Buyers Need to Know About Mortgages

home for sale in bayonneIt’s no secret: homes aren’t cheap. And frankly, most of us just don’t have a few hundred thousand dollars lying around… so that’s where mortgages come in. Simply put, mortgages are loans used by individuals or businesses to purchase real estate.

Here’s what you need to know about mortgages and mortgage options when buying a home in Bayonne.

What Do Mortgage Payments Include?

Many first-time buyers wrongly assume that monthly mortgage payments include only a repayment of the original amount borrowed to purchase the home or property. In fact, there are four components to a typical mortgage payment: Principle (the amount borrowed to purchase the home), Interest, Taxes (calculated by the town based on property values), and Insurance (namely, homeowners insurance), or PITI.

Mortgage Interest Rates

mortgage caluclationsAny time you borrow money, there’s usually interest associated. In other words, money you pay in addition to repaying your original borrowed amount. Mortgages are no different. However, there are two different ways of paying interest on mortgages.

Fixed-Rate Mortgage

The most common, fixed rate mortgages designate a certain interest percentage (usually based on current market interest rates). This rate stays the same throughout the duration of the mortgage, making monthly payments very steady and predictable.

Adjustable-Rate Mortgage

Adjustable-rate mortgages (or ARMs) do not utilized fixed interest rates. Instead, these typically start out with certain percentage rate (often lower than market) for a set period of time, then flux to fit the current market. These are much less predictable, as interest rates will rise and fall with the market.

Types of Mortgages

Now you know a little about what’s in a mortgage, it’s time to understand different mortgage options you may have. To get a complete list of options specific to your unique needs, financial situation, and location, it’s always best to ask local lenders and banks.

Conventional Mortgage

calculating a mortgage for bayonne home buyersThis is your “typical” mortgage, usually requiring a 20% down payment, excellent credit, low debt-to-income ratios, and sufficient income. Interest rates are typically market value.

VA Mortgage

For active and veteran service members, VA mortgages offer special benefits, including 0% down payments, lower credit and income requirements, and sometimes even lower interest rates. These may require a funding fee, based on the status of the service member.

FHA Mortgage

Like VA mortgages, these government mortgages offer lower credit and income requirements, as well as lower (think 3-5%) down payments. They do, however, require mortgage insurance, which typically adds about $30 or so to your monthly mortgage payment.

Calculating Mortgage Payments

calculating mortgage when buying a home in bayonneWhen determining a budget for your home purchase, it’s important to take all these factors into consideration. An easy way to do this is to use a mortgage calculator, which will account for the price of the home, an estimated interest rate, annual property taxes (which can usually be found in each property listing), and estimated annual insurance (which varies by insurance company).

Ready to Buy Your Home in Bayonne?

Are you thinking of buying a home in Bayonne, NJ? If so, then it’s time to contact Century 21 Viewpoint Realty. We’re here to help you explore the area, discover its amazing community, and find the perfect home for your needs.

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