If you're looking to purchase a home, it can be an overwhelming process. There are many real estate and mortgage terms that may confuse you--one example is the difference between an appraisal and inspection. Understanding what these functions do for both parties involved will help make smarter decisions in your quest for housing!\nHome Inspection\nHome inspections are important for buyers to keep their investment protected. Insuring your purchase is a smart move, and who doesn't want peace of mind? A home inspection is one way you can do this; it's scheduled in advance before the final papers are signed so there won't be any surprises later on. With an inspector coming out beforehand, they evaluate if anything would go wrong down the line with structures or other issues that could have been unknown about until after closing time! They will usually check for leaks or needed repairs in electrical work, plumbing issues, built-ins (like cabinets), roofing material/condition; focus on anything from building code violations to structural concerns like termites. Once inspected it's up to prospective homebuyers as whether they want this information disclosed with their offer.\nHome inspections are an essential part of buying a new home. They allow buyers to learn more about their future property and can even save them from unpleasant surprises in the process! For those who don't know any inspection companies, your realtor should be able to give you some recommendations. You can also check out the American Society of Home Inspectors to help you choose. They have a list of which organizations are qualified and they offer tips on how to be ready for your inspection.\nAppraisal\nAn appraisal is an unbiased third party often assigned by the mortgage lender to make sure that all parties involved (buyer, seller, and lender) receive a fair price for property. Appraisers are highly trained professionals who must meet certain academic qualifications before they can be licensed as appraiser through their state's governing body. Most lenders have a list of qualified appraisers from which you may choose one whose opinion will best suit your needs! The inspector will make sure the property is up to code and that any potential hazards are eliminated. They also check for comparable sales in the area, which makes them a great resource when it comes time to sell your home. Once they have completed their inspection, they'll compile all this information into a detailed report that includes pictures and calculations on how much each facet would affect the house value if changed. This way you won't need to guess about any details or wonder why your appraisal is higher than another one while trying to negotiate with potential buyers!\nBuying your first home is an exciting and exhilarating process. It can also be confusing and a little scary; that's why Next Door Lending is here to help with all of your financing needs! If you're thinking about buying a house or have questions about mortgages, get in touch with one of our loan officers today.\n

The age-old question - What’s better, a 15 or 30 year? There’s no one-size-fits all solution because everyone is different and has varying real estate and financial goals. For example, it depends if we're talking about a purchase or a refinance or whether you're a first-time buyer with nothing in your bank account or a seasoned homeowner close to retirement. Ultimately for buyers who can only afford low down payments, 30-year fixed rate mortgages will likely be the only option.\n30-Year Mortgages are the Most Popular\nIn the United States, around 70% of all mortgages are 30-year fixed products. The percentage for 15-year mortgage loans is roughly 15%. When it comes to purchase specifically, 30-year fixed loans dominate at 90%! Why is this? Well, it is cheaper to take a 30-year mortgage than the 15 because you have twice as many years to pay it off. Most mortgages are based on an amortization schedule of thirty full years, which means that they will be paid in their entirety after this time. The 30-year fixed rate loan program is straightforward since it never changes and has no surprises during these normal terms.\nThe long term of a mortgage is one which allows home buyers to purchase expensive property without breaking the bank. But it also means paying off your mortgage will take quite some time - in fact it could extend into retirement or further. In summary, this type of loan can be safe and easy to wrap your head around; not to mention affordable due to its length. As such, there are many housing counselors who endorse mortgages like these.\nWhen it comes to refinancing, 15-year fixed rate loan market share is significantly higher, mostly because borrowers don’t want to restart the clock after they’ve already paid down most of their loan. It’s also more affordable to go from a 30-year fixed to a 15-year fixed because your loan balance will be smaller than at the beginning, and ideally interest rates will be lower as well.\n\n15-Year Mortgage Rates Are Lower\nYou pay a premium for a 30-year mortgage vs. a 15-year mortgage in the form of a higher interest rate. More time to pay off your loan = more cost. After all, mortgage lenders are agreeing to give you a fixed interest rate for double the amount of time, which is a risk for them, especially if interest rates rise significantly during that time.\nYou’ll find that 15-year mortgage rates are typically about 0.50% – 0.75% lower than 30-year fixed mortgage rates. While the lower interest rate is enticing, know that the 15-year fixed-rate mortgage comes with a higher monthly mortgage payment because you have half the time to pay it off.\nYou could save a substantial amount of interest over the duration of the loan if you went with the 15-year fixed as opposed to the 30-year mortgage. You also build home equity a lot faster, as each monthly payment would allocate much more money to the principal loan balance as opposed to interest.\nThe higher monthly payment on a 15-year makes it harder to qualify for though because your DTI ratio might be too high. For borrowers counting pennies, the 15-year mortgage unfortunately isn’t an option. However, there is a solution - \n\nMake Larger Payments\nIf you're determined to pay off your mortgage faster, consider a 30-year fixed and make extra payments every month. This flexibility would protect you when things are tough financially but could allow you to knock several years off your mortgage. You can also look into biweekly mortgage payments which you may not even notice leaving your account.\n

Amortization is kind of like a marathon. It might be difficult at times but eventually things get easier as we reach our final destination (becoming mortgage-free)! Over the course of your loan, amortization will help you to pay less in interest and more in principal each month as it adjusts this ratio for you. When starting out with a new home or business, paying off an expensive monthly payment feels impossible at first but after some hard work and dedication, it's amazing how close we get!\n\nHow does it Work?\n\nWhen you first take out a home loan, regardless of whether you’re buying a new property or refinancing an existing mortgage, the balance on your loan is at its peak. That means that the amount of interest owed in total will also be at its highest.\n\nYour lender could technically skip amortization and make sure every payment includes equal portions of principal balances; but doing so would quickly become a budgeting nightmare as you would have to pay a different amount each time.\n\nAmortization is key to keeping monthly mortgage payments the same throughout a loan. The payment amount changes based on how much of it has been paid off, but amortization ensures that you'll have steady payments for your whole life with this type of borrowing.\n\n\nAmortization gives you more buying power\nAmortization seems complicated, but it has a definitive effect on your ability to get financing. By having a fixed recurring payment every month, the loan officer can better determine if you’ll be able to handle this monthly mortgage expense given your current credit rating and income. If these payments vary from one another too much, then they might lose confidence in whether or not you'll make those future payments on time.\n\nBy using amortization, your monthly mortgage payments are smaller and can allow you to borrow more in the long term. This will give you a better chance at finding your dream home!\n\nAmortization Calculator\n\nThe most straightforward way to understand amortization is by looking at an Amortization Table, which will list each monthly payment and detail how much goes towards the interest or principal. If you already have a mortgage this information was included in your loan documents.\n\nYou can also check out NerdWallet’s mortgage amortization calculator to see what your monthly payments might be. This handy tool can take into account how much you plan to borrow, any down payment, and even factors in local taxes! \n