What is a Mortgage?
A mortgage is a type of loan used to purchase real estate properties and is an agreement between the buyer and the mortgage lender to pay the loan amount over a set number of years, along with interest.
Many borrowers do not have the total value of their new home readily available when they decide they want to purchase. Mortgages allow borrowers to buy a house by putting down as much as they can and obtaining the rest through a home loan. Mortgages expand homeownership and inclusively allow individuals of all backgrounds to become homeowners.
Before a borrower can get a mortgage, they must apply and choose a loan type. Borrowers need to reach out to mortgage lenders and meet the requirements to qualify for the loan. Requirements include credit score, debt-to-income (DTI) ratio, and down payment ranges. All the requirements also help mortgage lenders determine loan amount and interest rates.
When it comes to loan types, borrowers have a wide range of options. Borrowers can decide between fixed-rate loans and adjustable-rate loans. Fixed-rate loans have a set interest rate and consistent mortgage statement for the life of the loan– statements may fluctuate if taxes or homeowners’ insurance adjust. Adjustable-rate loans have fixed interest rates for a set amount of time and then periodically adjust after. Borrowers may also shop around for loan options such as conventional, jumbo, VA, FHA, ARM, or USDA loans.
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