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The decision
to buy a home can be one of the most valuable and important
investments one can make. Therefore it is important that you
are familiar with the mortgage process so that you can wisely
finance your home. Essentially, a mortgage is just a loan
that is used to finance the purchase of property. The property
itself is used as security to ensure repayment until you have
repaid the entire amount plus interest.
There are many types of mortgages on the market and finding
the right one can be an overwhelming project. The best approach
is to divide the process into manageable tasks. Sit down with
a mortgage professional and examine the advantages and disadvantages
of all available options to determine which product is best
suited to your current situation and future plans.
How to Find the
Right Mortgage
- Estimate
how long you expect to live in the house. If the answer
is less
than three to five years, consider an Adjustable Rate Mortgage
(ARM),
which typically starts out with a lower rate. If you plan
to live in your new
home longer than five years, a fixed-rate mortgage offers
protection against rising interest rates.
- Shop
around for mortgage rates. Banks, credit unions, and mortgage
companies all offer mortgages. Compare at least six lenders
in your area.
- Add
up all the costs for each lender. Include fees, points,
closing costs,
etc., to arrive at the total mortgage cost for each lender.
Mortgage
Terms
- Amortization
Period:
The period of time after which, if all monthly payments
are made on time
and in full, the loan will be paid out.
- Down
Payment:
The amount of money provided by you, the purchaser toward
the price of
the property (not including legal fees or other acquisition
costs).
- Interest
Rate:
The actual cost of borrowing money, charged as a percentage
of the outstanding amount owed. Usually compounded on a
monthly basis.
- Mortgage
Amount:
The total amount of money to be borrowed by you, the purchaser,
and
applied toward the price of the property.
- Prepayment
Privileges:
The right of the borrower to pay out all or part of the
outstanding principal before it comes due.
- Term
of the Mortgage:
The period of time during which the loan contract is active.
During this
period, you the Borrower makes periodic payments (usually
monthly) to
the lender and at the end of the term the balance of the
loan becomes due
and payable.
Mortgage
Calculators
The Mortgage
Base web site provides a Pre-qualifier Loan calculator
The Mortgage
Market Information Service web site has several types
of calculators:
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