Home Loan Basics

Home Loan and Real Estate Mortgage Basics

A mortgage or home loan is a loan that is used to purchase a home, investment property or other type of real estate. The main component of your real estate loan is a legal contract that specifies the terms of repayment, loan amount, interest rate and other related details. A home mortgage will typically include real estate taxes and insurance as well as a payment towards the principal loan amount.

While a large number of real estate loan variations exist there are a few basic terms that apply to all of them.

Fixed Rate Real Estate Loans and Mortgages have a fixed interest rate over the entire term of the loan. Most home loans are fixed rate. The advantage for you as a buyer is a payment that will never change. However this could be a disadvantage if interest rates fall during the term of your home loan.

Adjustable Rate Real Estate Loans and Mortgages often start with a lower interest rate than many fixed rate home loans. This lower rate may last for the first 1-5 years of the loan. After that time the rate usually adjusts every year to a pre-determined index. Adjustable rate home loans are a good choice if you expect to live in the home for less than five (5) years. Adjustable rate real estate loans are common with investment property and commercial real estate.

The mortgage term is the total number of years that you have to repay the real estate loan. Most home loans have 30 year terms but there are 10, 15 20, 25 and 40 year terms available for most buyers.

The down payment is the total dollar amount you use to pay for the property outside of the real estate loan. Stated another way it is the difference between the purchase price and amount of your real estate loan. Many low down payment and no down payment home loan options are available for home buyers. A lower credit score can be overcome with a larger down payment.

Get pre-approved for a home loan or other real estate loan before you shop and be in a better position for negotiating. The property seller will know your offer is solid because you have been pre-approved for a home loan. You benefit by knowing exactly how much home you can afford and saving valuable time during the home search. Get started today without any obligations by completing our home loan pre-approval request below.

Fill out my online form.