Purchasing a home or property might be the largest financial decision you'll ever make. The good news? You're not alone. More than 45 million U.S. residents have a mortgage of some sort. The key is to ensure that the mortgage product selected is right for you.
A mortgage is a legal document outlining a loan agreement between a borrower and a lender. It's proof to the lender that you, as a borrower, can and will pay back your loan.
Mortgages require scheduled payments. These payments are broken into a few key areas:
- Interest —Consideration in the form of money paid for the use of money, usually expressed as an annual percentage.
- Taxes and other fees — Property taxes, homeowners insurance, flood insurance (if required), and mortgage-insurance premiums can play into many mortgage payments, depending on the loan type.
How much will your payment be? It depends on the size and term of the loan. Spreading a mortgage over a longer period of time — 30 years, for example — can lower monthly payments. But over that time, you'll likely end up paying more interest than if you had chosen to finance the mortgage over 15 years.
While there are many types of mortgages, all will have either a fixed interest rate that never changes or an adjustable rate that can rise and fall based on a particular economic index .
To determine which loan suits your situation, a bank will look at multiple factors. These can include your credit score, income, assets and debt.
An assortment of loan products and options are available.
about how mortgages work and which one might be best for you.