Mortgages 101

When it comes to buying a home, we know that it seems like it comes with a much higher cost than renting. However, it’s a bit more complicated than that. While there may be some larger, upfront costs to buying your home, there are also major financial and emotional benefits to going in that direction. You may also have heard that now is a great time to buy a new home. But you may also have heard that interest rates are rising. Both of those statements are true. Yet it’s important to note that while interest rates are rising, they’re still at a historic all-time low. Combine that with the fact that rent in Reno is increasing at an average of 17% year over year, and suddenly buying a home doesn’t feel so daunting.

If you’ve been dreaming about owning your home, you likely have a lot of questions. Is it more affordable to rent or to own my home? What’s a mortgage, and how does it work? What do the rising interest rates mean? Luckily, we have answers!

What is a Mortgage?

Simply put, a mortgage is a type of loan used to buy a home. According to a 2021 National Association of Realtors report, 87% of home buyers use a mortgage to buy their home. Mortgages allow you to borrow large sums of money, then pay it back at a low-interest rate over a long period of time. The money borrowed through a mortgage can only be used to buy, refinance, or improve a home. You may have heard of Fannie Mae and Freddie Mac in the context of home loans/mortgages, and that’s because they are both government organizations that support most first-time home buyer mortgages.

What are the Types of Mortgages?

Mortgages - like homes - come in all shapes and sizes. Here are two of the most common mortgage types available to you.

• 30-year, fixed-rate mortgage (FRM): as it says in the name, this means you have 30 years to pay back what you borrowed. So your loan will be broken into 360 payments made at a fixed interest rate. This means your monthly payments are always the same. This is the most popular type of home loan.
• 15-year, adjustable-rate mortgage (ARM): similar to a 30-year FRM, a 15-year ARM is a type of mortgage where the interest rate is fixed for the first 15 years, then it adjusts and remains at the new interest rate for the remainder of the loan.

Do You Have to Put Down 20%?

The short answer is: no. That’s a common misconception. The average first-time home buyer often puts down 6%, or there are certain loan programs that will allow as little as 3% or even 0% down. According to the National Association of Realtors Confidence Index, 52% of all non-cash buyers put down less than 20% on their homes, and 74% of first-time buyers put down less than 20%. This means that the right down payment amount depends on your current savings and your home-buying goals. So if purchasing a home with less money down means you can become a homeowner sooner, that’s often the right choice to make!

One thing to note is that if you’re able to make a larger down payment, that will help to reduce your loan amount and monthly payments.

What is a Mortgage Pre-Approval?

A mortgage pre-approval is a way for you to determine how much house you can afford to buy. It’s also a great way to show the seller that you’re qualified to purchase the home. The process for a mortgage pre-approval involves a mortgage lender reviewing your income, assets, and credit report (same as they will do during the actual mortgage process). Mortgage pre-approvals are valid for 90 days. If you’re serious about buying a home, getting pre-approved is definitely a recommended step to take in your home-buying process!

If you’re interested in a Jenuane home, you can work with our trusted lender, Guild Mortgage, to join our VIP Priority List. This process involves being pre-approved while also being one of the first to know when new Jenuane homes come on the market!

Ready to Become a Homeowner?

We’ve teamed up with our trusted lender, Guild Mortgage, for a rate buy-down summer special with additional incentives! Stay tuned for more details about this exclusive summer special offer!

Now is also a great time to take advantage of the historically low-interest rates and lock in your mortgage before they increase again! We look forward to helping you find your dream home, and we’re committed to helping you afford that dream.

Ready to call a Jenuane community home your own? Reach out to our concierge team today to get pre-approved with one of our trusted lenders to secure your spot on our VIP priority list.