Mortgage Loan Basics
Mortgages are loans specifically for purchasing real estate dwellings where the “home” is used as collateral. Some terms as they apply specifically to mortgage loans are:
- Collateral: When a borrower opts into a mortgage loan, their new home purchase becomes the collateral, meaning if they do not repay their loan, after a stringent legal process, the home can become the property of the lender
- Conventional Mortgage Loan: A loan not guaranteed by the government
- Credit Score: Mortgage loans are probably the largest amount of money anyone can borrow in your lifetime and for that privilege, borrowers must repay the principal value with interest. The better (higher) your credit score, the lower interest rate you will be charged, thus saving you thousands of dollars over the lifetime of the loan
- Default: When borrowers do not properly repay their mortgage loans
- Interest Rate: The amount you get charged to borrow money from a financial institution for a mortgage loan
- Pre payment: The act of paying off ones mortgage loan earlier then the loans expiration date
- Principal Amount: The actual dollar amount you are borrowing to purchase the home
Mortgage loans are as basic to the Americana lifestyle as is apple pie! Owning your own house, condo, or other type of living is part of the American dream, and securing a mortgage loan is one of the only ways to finance the purchase. If you plan on buying a home for the long term, say more than ten years, experts advice that you should go for a traditional fixed rate mortgage. It has been said among many people, that “if you do not qualify for a traditional 30 year fixed-rate mortgage, then buying a house may not be for you.” There are many other variations for mortgages but for the first time home buyer, a fixed rate mortgage will mitigate any chance of unpleasant surprises.
