Mortgage Loans - The Basics
So you've decided to graduate from renting a home and buy a home. Homes are very expensive so the average person can't afford to pay for one on their own. Buyers rely on banks to loan them the money to buy a home. Mortgage loans are one of the most common loans. No matter who you are or what your situation is, it is likely you need a mortgage loan at some point in your life. For this reason, it is important to learn about them to know the basic ins and outs of a mortgage.
Fixed rate mortgages have been around the longest and are still one of the most frequently used loans. If you decide on a fixed rate mortgage, you will have to choose the term of the loan. Most people have a thirty year term, but options for ten, fifteen and even forty year terms are also available in some cases these days. Obviously, a ten year mortgage would be the least expensive loan since the interest rates are usually lower and the amount of time you are paying interest is shorter.
Another type of mortgage is the adjustable rate mortgage. Often referred to as an ARM, adjustable rate mortgages can be tricky. Unlike the fixed rate mortgage, you don't get to lock in a set interest rate for the full term of the loan. The interest rates adjust based on the conditions of interest rates throughout the country. This means your monthly mortgage payment can get smaller, or bigger, depending on changes in the economic climate.
If you have twenty percent to put down, that is even better. There are 80/20 mortgage loans that allow you to avoid having to pay certain insurances on the house so it can save you money. An 80/20 mortgage means you've put down the twenty percent.
Current real estate conditions aren't favorable for people who might be trying to sell their homes. If you might not be able to afford the changes in an ARM, you should probably choose a different mortgage loan that is less risky. If you have a fixed rate mortgage, you can plan for the future knowing exactly what your monthly mortgage payments will be.
Mortgage loans are very helpful for those of us who hope to own a home someday. When it's your turn to make the purchase, be sure to choose the type of mortgage that is smartest for you.
Fixed rate mortgages have been around the longest and are still one of the most frequently used loans. If you decide on a fixed rate mortgage, you will have to choose the term of the loan. Most people have a thirty year term, but options for ten, fifteen and even forty year terms are also available in some cases these days. Obviously, a ten year mortgage would be the least expensive loan since the interest rates are usually lower and the amount of time you are paying interest is shorter.
Another type of mortgage is the adjustable rate mortgage. Often referred to as an ARM, adjustable rate mortgages can be tricky. Unlike the fixed rate mortgage, you don't get to lock in a set interest rate for the full term of the loan. The interest rates adjust based on the conditions of interest rates throughout the country. This means your monthly mortgage payment can get smaller, or bigger, depending on changes in the economic climate.
If you have twenty percent to put down, that is even better. There are 80/20 mortgage loans that allow you to avoid having to pay certain insurances on the house so it can save you money. An 80/20 mortgage means you've put down the twenty percent.
Current real estate conditions aren't favorable for people who might be trying to sell their homes. If you might not be able to afford the changes in an ARM, you should probably choose a different mortgage loan that is less risky. If you have a fixed rate mortgage, you can plan for the future knowing exactly what your monthly mortgage payments will be.
Mortgage loans are very helpful for those of us who hope to own a home someday. When it's your turn to make the purchase, be sure to choose the type of mortgage that is smartest for you.
About the Author:
Trinity helps people by showing them how to get mortgages for bad credit and other types of online loans.
posted by Credit Counseling at
12:11 AM
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