A mortgage is a loan that a person takes out in the process of buying a home. A mortgage loan can have a fixed rate, an adjustable rate, or a combination of the two. A fixed rate mortgage loan means that the rate is the same for the entire term of the mortgage loan. An adjustable rate mortgage means that the rate could change over the life of the loan, causing the payment to change.
Fixed rate mortgage loans typically have terms of 15, 20, and 30 years. Adjustable rate mortgage loans typically have terms of 30 years, but only a part of that term is fixed, say perhaps, 2, 3, or 5 years.
In what situation is a mortgage loan used?
A mortgage loan can be used by anyone buying or refinancing:
A primary residence
A second home
The first step in the mortgage loan process is to determine how long you intend to keep your property. Mortgage loans with initial fixed interest periods (2/1 ARM, 3/1 ARM, etc.) typically carry lower rates than 30 year fixed mortgage loans, giving a lower payment to someone planning to own a property for a shorter period of time.
Use RealEstateABC's ABC Values tool to check your properties' current home values.
Benefits of a mortgage loan
There are many benefits to having a mortgage loan. Having a mortgage loan means you own a home, and can build equity. Equity simply means the difference between the value of a property, and the amount you owe on the mortgage loan.
The interest on a mortgage loan is often tax deductible, saving you money. Having the ability to take out a second mortgage loan on your property gives you access to your equity. As mortgage rates change, you can refinance your mortgage loan to get a better rate.
Always read and understand the documents associated with your mortgage loan while going through the process. Have either an attorney or other trusted advisor with you, if needed, when signing mortgage loan documents.
Option ARMs, and specialty mortgage loans are best suited for borrowers that know how to use them. An example of this is someone owning an investment property that they absolutely know they will be selling in a few months. Always compare mortgage loan fees between lenders when shopping for a mortgage loan. Please visit the Fannie Mae website for more information on loan limits, on both first and second mortgage loans.
Mortgage loan resources
Loan.com wants to make this as straightforward of a process as possible for you by arming you with the tools that will help you to make informed choices. These tools include:
The Borrower's Bill of Rights - Our Borrowers Bill of Rights helps you avoid unethical lenders and get the most from ethical lenders.
Truth about Loans - Our in-depth library of helpful articles tells you what to expect at every step of mortgage process.
Loan.com is your mortgage rate and mortgage loan resource. Lenders have mortgage loan regulations options in all 50 states. Loan.com will help answer many of your mortgage loan questions.
Next Steps
Learn more about the home loan process in our Truth About Loans center
Use our Loan Analyzer mortgage loan calculator to compare your current mortgage offer to mortgage rates from our Rate Directory
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