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Mortgages

Introduction

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Mortgages Introduction

When you finance the purchase of real estate, there are many different mortgage loan options to choose from, and a mortgage lender or mortgage broker (who represents many lenders) can help you evaluate your choices.

Lenders will evaluate your income, assets and debt to decide how large a mortgage you qualify for. They can structure mortgage financing differently using various combinations of fees, interest rates and points (which you can purchase up front to reduce your interest rate). The interest rate you are offered will depend on the type of mortgage you are seeking, the term or length of the mortgage and your credit score. A good credit score will generally lead to lower interest rates and better terms. But even with poor credit, you are still likely to qualify for a mortgage with a subprime lender, although you may have to pay higher interest rates. By pre-qualifying for a mortgage you can lock in your interest rate for 30 to 60 days.

Popular types of mortgages include: fixed rate, adjustable rate, balloon and interest only mortgages. The interest on home mortgages is usually tax deductible. Mortgage terms can vary from 15, 30 or 40 years. If you can make a down payment of 20% or more of the home’s purchase price, then you avoid the added cost of private mortgage insurance (PMI). Closing costs will add to your upfront expenses.

The mortgage business is competitive, so shop around to find the lender and mortgage that best suits your needs.