If you’re thinking about buying a home, you should take comfort in the fact that 2016 is favorable for you. As you go throughout the mortgage loan process, there are many terms that you will come across, so it’s vital that you understand them in order to secure a loan that fits your financial lifestyle. Here’s a quick overlook of several terms you need to understand.
ARM (Adjustable-rate mortgage): An adjustable-rate mortgage is a loan where the interest rate can fluctuate throughout the life of the loan. With this type of loan, you can expect your monthly mortgage payments to fluctuate. If you have the type of income to accommodate this type of payment plan, then an adjustable-rate mortgage may be an advantage for you. Also, if you’re planning to live in the home for a short time, five to seven years, an adjustable-rate mortgage may be right for you.
Closing costs: These types of costs should be viewed as expenses that must be covered in order for the mortgage loan to close. Still yet, though, the buyer is responsible for covering these expenses. Closing costs normally cover:
- Origination fee
- Attorney’s fees
- Escrow payments
- Title insurance
- Any discount points
Down payment: If you want to secure a mortgage loan, you’re going to need a down payment of some sort. Whether it be collateral or cash, a 10 to 20 percent down payment is what’s typically standard, but there are options available that would require less of a down payment.
Fixed-rate mortgage: Have you ever wished for a steady paycheck? If so, then you’ve probably also wished for steady bills. Along with these bills comes a mortgage payment, and if you want a fixed-rate mortgage payment, then you need to take out a loan that comes with a fixed interest rate. With a fixed-rate mortgage, you can take comfort in knowing that your loan payment will stay the same throughout the entire life of the loan. This type of loan is usually preferred by those who plan to stay in the home long term and will be seeking a 20 to 30-year mortgage.