After you’ve decided to purchase a home, you need to decide on the best home loan for you. A home loan, or a mortgage, come in many forms. Considering that a home is a substantial purchase, it is important to research how you will finance this purchase.
Before you get overwhelmed with the tremendous amount of home loan products available, here are the basic elements of a home loan. Your mortgage payment will consist of these four pieces.
• The principle, the amount that you are borrowing for the purchase of your home.
• Interest, what it will cost you to borrow the money, this is a percentage of the amount you borrow.
• Taxes, most lenders will set up an escrow account and hold your annual taxes until payment is due.
• Insurance, in most cases, when the borrow puts down less than 20% the lender requires private mortgage insurance (PMI).
Now that you know the basic elements of your home loan, it’s time to discuss some basic loan types. You will need to decide if you want a fixed mortgage rate (FRM), adjustable mortgage rate (ARM), or a balloon mortgage. An easy way to decide which loan type is best for you it to evaluate how long you plan to stay in the home and how the current interest rates are fluctuating.
Fixed Rate Mortgage
The fixed rate mortgage home loan has it’s interest rate on the loan … [Read the rest]