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Mortgage Loans 101: The Primary Parts Of A Home Mortgage
To understand the home buying process is to understand the mortgage process. So before buying your first home, it pays to brush up on your mortgage knowledge.
Let's start with the basic parts of a mortgage. Understanding these three elements will help you determine your financial comfort zone, because when combined these elements will determine your monthly payment.
Also, if you use an online mortgage calculator, these are the three elements they will ask for.
The Primary Parts of a Mortgage Loan:
1. Size of the loan
2. Interest rate on the loan
3. Term (or length) of the loan
Size of the Mortgage Loan:
This one is fairly obvious. How much will you borrow? The size of your loan will primarily depend on your budget, your credit, and how much of a down payment you can afford.
Interest Rate:
The interest rate is the amount of interest charged on a monthly mortgage payment. It is a percentage of the principal loan amount. To find the current interest rates, you can start by visiting Bankrate.com or Interest.com.
Term / Length of the Loan:
Just like there are many types of mortgage loans, there are also a lot of mortgage terms (or lengths). The 30-year fixed-rate mortgage is one of the most common terms. "Fixed rate" means that the interest rate you get upon loan approval is the interest rate you maintain for the life of the loan.
Fixed-rate mortgages also come in the 15-year variety, but you'll generally pay a lower interest rate with the 30-year option.
Variable or adjustable rate mortgages offer shorter initial terms, sometimes as low as three or five years. With these types of loans, you would generally refinance or sell before the initial term expired.
Understanding the primary parts of a mortgage will help you plan financially for the home buying process. But don't stop with this lesson. Build on the knowledge you've gained here by learning about the various types of mortgage, how to interpret your credit score, and other mortgage-related topics.
The more you know, the better your home buying experience will be.
* Copyright 2006, Brandon Cornett.
About the Author :
To learn more about the home mortgage loans visit http://HomeBuyingInstitute.com, the Internet's largest library of home buying advice. Visit: http://www.homebuyinginstitute.com today!
More Useful Resource and Updates on mortgages mortgage rates and home loans by quicken loans
- Interest rates cuts: More than half of mortgage borrowers will not benefit from the interest rate cut (Daily Telegraph)
Home owners hoping to benefit from the interest rate cut are likely to be left disappointed with many lenders unlikely to pass on the full one point cut.
- Banks to be forced to pass on interest rate cuts on tracker mortgages (Daily Mail)
Mortgage lenders who use small print to avoid passing on any interest rate cuts could be forced to give their customers the full benefit of any cut,a City watchdog ruled today.
- Fixed-rate trap snares 43,000 home owners (Sydney Morning Herald)
MORE than 40,000 unlucky people have been caught out in a fixed mortgage rate trap, having taken out their loan at the highest fixed interest rates in a decade, denied any saving from the recent cuts and confronting costly break fees if they decide to refinance.
- Home builders' shares soar as mortgage rates plunge (The Forex Market)
NEW YORK, Dec 4 (Reuters) - Shares of U.S. home builders rose on Thursday as the beleaguered sector, floundering amid a protracted downturn, extended a six-day rally spurred by the largest drop in interest rates on 30-year fixed-rate mortgages in 27 years.
- Mortgage-Bond Yields Plunge, Suggesting Record Home-Loan Rates (Bloomberg)
Dec. 4 (Bloomberg) -- Yields on Fannie Mae, Freddie Mac and Ginnie Mae mortgage bonds tumbled to the lowest on record following reports that Treasury Secretary Henry Paulson is considering a plan to push home-loan rates down to 4.5 percent.
- Mortgage rates drop again (UPI)
WASHINGTON, Dec. 4 (UPI) -- Interest rates for 30-year, fixed-rate U.S. mortgages fell dramatically during the week, the Federal Home Loan Mortgage Corp. said Thursday.
- Mortgage lenders pass on rate cut (Channel 4)
Lloyds TSB and HSBC said they would be passing on the 1% interest rate cut to their variable rate customers in full.
- Tracker mortgages: FSA warns lenders over 'interest rate collars' (Guardian Unlimited)
Banks and building societies were today warned they could find themselves in hot water if they use small print terms to avoid passing on this week's likely interest rate cut to their tracker mortgage customers. The Financial Services Authority has waded into the row over the "collars" or "floors" that some mortgage lenders have in their terms and conditions, which allow them not to pass ...
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