Is financing a house the same as "getting a loan to pay it off"? Is paying so much/month just like paying the

Question

if you want to finance a house, does that mean you have to get a mortgage loan to pay for the house, and then pay so much per month to pay off the mortgage loan? I thought it was just like you pay the down payment and then get into the house, then pay so much per month for so many years (i.e. 15 or 30 years (depending on the length of your mortgage) until the house is paid for. I know that is how it is when you are buying a car-- pay the down payment, then you make payments to pay off the cost of the car. Is it not the same with houses? Also, is the down payment the only thing you have to pay up front when buying a house? like if I saw a mobile home that is $15,750 and the dowm payment is 10% of that, does that mean I could just pay $1,570 and then get into the mobile home?

Answer 1

Yes ,
The down payment is just the % of the sale price that you are putting down .
There are several thousand in other processing fees and points that is usually required .

http://www.bankrate.com/brm/rate/mtg_home.asp

Either you pay higher closing costs / points and get a low loan % rate or
Lower closing costs / points and a higher loan % rate .

And if you have less than 20% down , you will have to pay PMI (private mortgage insurance ) so always have at least 20% down to avoid that bill that can be hundreds of extra dollars every month .

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Answer 2

Yes your thinking is right with regard to paying it off in payments until paid off, with some small exceptions.

With a car you have insurance too as with a house. But with a house you also have taxes. These are billed separately by your county attached to homes in order to fund things like city sewer, emergency services, school bonds and more. These are either collected monthly by your lender and put in escrow to be paid for you 2 times a year or paid 2 times a year in lump sum by you directly.
Insurance is usually paid once a year. And if you live in a flood zone......lenders require flood insurance too.

Real estate transactions are a little less simplistic than a car..

You can't just come in with the 10% down on a real estate transaction . There are cost associated with purchasing real estate even if you came in with 100% cash.

There are title charges - Title insurance to make sure no leins are on the title for you and one for the lender. Of course, if you paid cash and had no loan you wouldn't need the lenders policy.

Appraisal, inspections, some taxes depending on when you purchased in the year.....etc.

Obviously most people don't pay cash. So they wind up with more costs because of lender fees, loan processing, origination of the loan. But many loan officers charge junk fees. Find out what they are and don't let your self pay what you don't need to. Many costs are rolled into the loan for people who can't pay upfront. But don't confuse that with no cost - it does cost in the form of higher interest rate.

Sellers are willing to contribute toward closings cost right now in this market which makes a little easier on buyers cost wise and may even help them to buy down the rate (paying the lender more upfront to get a lower interest rate)......
Good Question & Good Luck!


Open Book Advisors™

Answer 3

A morgage is a loan from a bank or morgage company. Often these morgages are sold to investors who receive cash flows from the morgage over the life of the loan. When you finance a car you are in fact takeing a loan from the financing company or auto financing company. Often when you buy a house you pay points or a percentage of the total loan for administration cost and additional cost and brokerage cost.

Answer 4

your concept is generally right but there is more to the process.there is the security instrument and the promissory note.you might want to take a first time home buyers workshop.good luck.