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Mortgage Information
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
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