First Time Home Buyer www.fhamortgage.org
A mortgage loan is used to obtain the required money to buy a property. The loan is secured on the borrower’s property, meaning that a legal instrument is put into place that lets a bank or lender to repossess the secured property if the borrower defaults on a loan. As a first time home buyer, thee is a great deal of information that can help you make a good decision.
Most people do not have enough funds or cash on hand to allow them to buy property in whole. Mortgage lending takes into account the risk associated with a mortgage loan; they consider the potential that the funds will be repaid. If they are not repaid, a lender may foreclose and recover some or all of its original loan amount.
The two basic types of amortized loans are the fixed rate mortgage and adjustable-rate mortgage, known better as an ARM. Fixed rate mortgages are more common in the U. S., but floating rate mortgages are used often, as well. A combination of fixed and floating rate mortgages may also be used. This is where a mortgage loan will have a fixed rate for some period, first five years for example and a variable rate after the end of that period. That order can also be reversed. FHA loans are one of the available choices for a fixed rate loan.
Besides the two standard methods of setting the cost of a mortgage loan, there are variables in how that cost is paid. This also true for how the loan itself is repaid. Repayment will depend on the locality, tax laws and prevalent culture. Different mortgage repayment arrangements are available to fit different types of borrower. The most common way to repay a secured mortgage loan is by making regular payments of the money borrowed (called the principal) and interest over a specific time frame. This is best know as amortization. If you are considering buying a home, for a first time home buyer www.fhamortgage.org is a great resource for answering you questions and developing a plan.
Depending on the size of the loan and prevailing practice the term may be as short as ten years or as long fifty years. Most commonly, thirty years is the maximum term, although shorter repayment periods, such as 15-year mortgage loans, have also become more common. Mortgage payments, which are typically made monthly, contain a capital (repayment of the principal) and an interest element. The amount of principal included in each payment will vary throughout the term of a mortgage. In the early years of a mortgage, repayments are largely interest and a small part of the principal.
As a borrower progresses through the mortgage period, the amount of the payment toward the principal will increase. Towards the end of the mortgage the payments are mostly principal and a smaller portion interest. In simple terms, this assures that the payment amount determined at the time of the loan is repaid at a specified date in the future. This gives borrowers assurance that by maintaining repayment the loan will be cleared at a specified date, if the interest rate does not change. Some lenders and 3rd parties offer a bi-weekly mortgage payment program designed to accelerate the payoff of the loan.
For a first time home buyer www.fhamortgage.org is ideal for gaining the knowledge you will need for getting an FHA loan.