One of the most prominent forms of mortgage payments is the fixed rate mortgage. Unlike the adjustable mortgage, the fixed-rate mortgage lets a homeowner know exactly what his or her payments will be during the length of the loan, generally 15, 20, 25 or 30 years.
Experts generally say that the fixed-rate is preferable to the adjustable-rate if interest rates are low at the time the mortgage is taken out and if the owner expects to live in the house for at least several years.
Balloon loans carry a fixed interest rate, generally for seven or 10 years, at the end of which the borrower must make a lump-sum payment of the balance of the loan or lose the property.
Two federal government mortgage organizations help first time home buyers that are to benefit consumers are Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation), which purchase bundles of home loans and sell them as securities to investors. Fannie Mae-approved lenders, for instance, are supposed to help consumers find the lowest cost mortgage for which they qualify. Both Fannie Mae and Freddie Mac have Web sites that detail their services.
However the mortgage is shaped, any mortgage transactions will require:
- Appraisal - a professional appraiser inspects the appearance of the property and studies the condition of the neighborhood to determine the property's value and ensure that the property is a safe investment.
- Escrow - Documents and money that are kept by a third party until contractual conditions are met by the parties involved in a sale of property.
View article on adjustable mortgage.
- Closing costs (also known as settlement costs) - Not included in the property's sale price, these are expenses that must be paid before title to the property is transferred to the new owner.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.