Many Charlotte mortgage companies profit from borrower ignorance. AmeriSouth Mortgage Company is a mortgage lender dedicated to consumer education. We believe that an informed public is a powerful public because knowledge is power. We would like to explain how mortgages work, what they are, and who they are right for.
What is a Mortgage?
A mortgage is a secured loan, and a secured loan is different than a loan you might incur buying a car, racking up credit card debt, or using a store card. These kinds of loans are unsecured. The difference between a secured loan and an unsecured loan is that secured loans require an asset to be used as collateral for the loan. With a secured loan, in the event you don't pay back your loan, the lender can legally take the asset you placed as collateral for the loan. With a mortgage, the asset you place as collateral is the house you are buying.
The upside to a secured loan is that in exchange for the security that you place as collateral, the lender will give you a much lower rate than they would for an unsecured loan. While you might be able to get a mortgage loan for 5% interest, you might pay anywhere from 12%-30% for an unsecured loan.
The Need for a Down Payment
Once upon a time, lenders could loan as much as the full value of a property a home buyer was seeking a loan for (and more!). Today, you can expect to pay at least 20% of the total cost of the home out-of-pocket in the form of a down payment. 20% is not a definitive figure. The amount you are required to pay as a down payment depends on your income, your credit, and the policies of the lending institution that you choose. At AmeriSouth Mortgage Company, we generally offer loans with roughly a 20% down payment.
What if I Want to Move or Sell the House?
You may have heard people say, "You should only buy a house if you will be living in it at least three years." This might be true in some instances, but there are ways to buy and sell in a short amount of time and make money. You don't have to worry about being stuck. It's easy to see why people think this way though. It all comes down to simple math.
Most houses appreciate 3% per year. If you buy a $100,000 house at market value, after six months, if you decide you want to sell your house, your home will have appreciated at 1.5%. This gives you a market price of $101,500. After you pay your realtor and closing costs to sell, you will have lost money. Plus, at the beginning of owning and paying off a mortgage, most of your money goes towards interest, not the actual mortgage. This is where the three-year rule comes in to play. With this wisdom, the longer you hold, the better chance you will not lose money. But then you are a slave to your house.
What if you want to travel or move to another house? If you buy strategically, you can sell immediately and make money. There are ways you can buy where your house can make you money every month by renting after you move. The strategic approach to buy a house involves several factors. If you're interested in strategic buying, contact AmeriSouth Mortgage Company for some great tips. You have to think like an investor, and never buy a house based purely on emotion. Other Charlotte mortgage companies may not tell you this, but at AmeriSouth, we know that our success depends on your success.