How Mortgages Work

So you are wanting to buy a home. This means you will have a mortgage to pay. There are many types of mortgages available to choose from. The type of mortgage you choose will depend on the length of time you think you will be in your home or whatever other financial obligations you might have at the time.

Fixed mortgage rates fall under three types:

• 30 year
• 20 year
• 15 year

Adjustable-rate mortgages are for how often your interest rate adjusts:

• 5/1 arm- the initial rate is 4-5 years then adjusts each year beginning on the 6th year.
• 3/3 arm- the initial rate is 3 years, and then adjusts every 3 years with the 4th year starting the adjustments.

Other things to know about receiving a mortgage are things like Caps, Interest Rtes, Balloon Mortgages, Federal Housing Administration Loans, Veteran’s Administration Loans, Rural Housing Service Loans,APR (annual percentage rate), Debt-To-Income-Ratio of 28/36, Total Monthly Debt, and of course the Mortgage Costs. All of these things are taken into consideration when being approved for a Mortgage.

Typically you will have to pay 3-6 percent of your total loan amount in closing costs. Other fees applicable but may be dismissed are to include:

• processing fees
• apraisal fee
• original fee
• discount points
• documents preparation fee
• attorney fees
• home and pest inspection fee
• homeowners and hazard insurance
• private mortgage insurance (PMI) automatic termination of PMI
• surveys
• prepaid interest
• deed recording fees
• title search fees
• title insurance
• closing taxes

Be sure to do research and know what, and how you are doing before you begin the process.