What is a Mortgage?
A mortgage is a loan secured by a property/house and paid in installments over a set period of time. The mortgage secures your promise that the money borrowed will be repaid. For most of us, a mortgage is the largest and most serious financial obligation we ever make.
There are many different types of mortgages, each with its own advantages and disadvantages, it is very important that you do your research. Remember that many people were impacted by predatory lenders and given mortgages that they could not sustain during the housing crisis of the last two years. Understanding these differences will enable you to choose the right mortgage for your financial situation and housing goals. Be an educated consumer!
Responsibilities that come with a mortgage
Before taking on the responsibility of a mortgage, which is a legally-binding financial commitment that could last several decades, make sure you are ready.
1) Are you currently in a financial position to comfortably make the monthly mortgage payment? Use our mortgage calculator to see what your payment might be.
2) Do you have a financial cushion for sudden financial difficulties (for example losing your job)? This cushion should cover six months of your expenses.
3) Do you know the risks if you cannot pay your mortgage in the future?
If you’ve answered these questions and think you may not be ready, then you should probably focus on building your credit reputation by paying your bills and arming yourself with knowledge as well as saving up the financial cushion most savvy homeowners have. By waiting until you are financially ready, you will help ensure your success as a long-term homeowner.
Choosing the right mortgage
Choosing the right mortgage means doing your homework about the different types of mortgages available to borrowers. It means shopping around because different lenders may offer different rates, points, and fees for the same type of mortgage. The guide below can help you understand some of the key advantage and disadvantages of today’s mortgage products and show you how to spot and avoid mortgage fraud.
Evaluate the pros and cons of a fixed-rate mortgage.
Know all the parts of an adjustable-rate mortgage.
Learn about balloon/reset mortgages.